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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005 ABU DHABI SECURITIES MARKET ECONOMIC AND POLITICAL DEVELOPMENTS Economic and Political Environment: Its most affluent and powerful emirate, Abu Dhabi, largely directs the development and diversification of prosperous United Arab Emirates (UAE), one of the more diversified and open market economies of the Middle East. Enormous hydrocarbon reserves, including almost 10% of known global oil deposits (97.8 billion barrels in 2004), and the world's fifth largest gas reserves (212 trillion cubic feet in 2004), following Russia, Iran, Qatar and Saudi Arabia), are the basis of the federation's wealth. However one emirate, Abu Dhabi, possesses nearly 95% of all hydrocarbon deposits with Dubai and Sharjah holding the majority of the remainder. While continual federal budget deficits might retard major development projects in other nations, the estimated US$ 350 billion foreign asset position of Abu Dhabi's provides a large, independent income stream equivalent to approximately 60% of the federation's annual GDP. Having experienced the adverse impact of low oil prices on a number of occasions, most recently in 1998, the UAE is aggressively diversifying the economy into trade, tourism, and heavily subsidized PAGE 34 agriculture and high technology industries. The federal government has invested heavily in aluminum production, tourism, aviation, reexport commerce, and telecommunications and the non-oil components of the economy in 2003 accounted for more than two-thirds of GDP and in excess of 30% of exports. Government emphasis on education, modern technological infrastructure, a business-friendly climate, and comparatively more freedom than other Gulf States has maintained the Emirates' status as one of the most dynamic economies in the region. Economic Performance: Due to high oil prices, GDP grew 7% in 2003, up from only 1.9% in 2002, when oil prices were depressed. In a testament to the strength of the UAE diversification program, non-oil GDP grew a whopping 5%, due to a number of projects in construction, upstream gas, and downstream oil services. Inflation, as measured by the consumer price index (CPI) increased slightly to 2.8% from 2.3% due to higher oil prices. The fiscal balance recorded a large surplus of 13.7% in 2003, up from 10.8% in 2002. Key Information Contacts Abu Dhabi Chamber of Commerce and Industry www.abudhabichamber.ae Central Bank of UAE www.uaecb.gov.ae Ministry of Finance and Industry www.uae.gov.ae/mofi/ Ministry of Planning www.uae.gov.ae/mop Ministry of Economy and Commerce www.uae.gov.ae/moec UAE GDP, CPI AND INVESTMENT (Annual Change in %) Structural reforms are moving along at a rapid clip. Dubai extended foreign ownership of land and properties to certain real estate developments and also launched several new duty free zones. Abu Dhabi is moving ahead to privatize its water and electricity sectors by 2006. The current account balance has been in constant surplus in recent years and continuing strength in the oil prices should keep the current account in healthy surplus for years to come. In 2003, this surplus reached US$ 12.1 billion, or about 15.1% of GDP. Trade has played a major role in the UAE's economic growth and the free trade zones of Dubai and Sharjah have been large contributors. Both the trade balance and current account have registered healthy surpluses throughout the 1990s. 1 1 Economic and Political Overview, County Watch Incorporated, 2005 1999 2000 2001 2002 2003 Real GDP (at factor cost) 4.4 12.3 3.5 1.9 7 Hydrocarbon -4.5 13.1 1.7 -8.1 13.8 Nonhydrocarbon 7.5 12 4 5 5.2 Consumer price index 2.1 1.4 2.8 3.1 2.8 Investment (in percent of GDP) 27.8 23.3 24.7 24.1 22.4 * IMF 2004 Article IV Consultation with UAE
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005 ABU DHABI SECURITIES MARKET UAE GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture 3.0 7.6 Industry 52.0 41.8 Services 45.0 50.7 UAE MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES 1998 1999 2000 2001 2002 Money Supply M1 (dirhams-billions) 28 30 34 39 47 Money Supply M2 (dirhams-billions) 99 110 127 156 174 Growth Rate M1 9.5% 8.9% 12.6% 15.8% 19.2% Growth Rate M2 4.2% 115.0% 15.3% 23.2% 11.0% Interest Rates deposit rate 4.8% 4.6% E 4.4% E 4.0% E 7.74% E lending rate 7.9% 7.5% E 7.5% E 7.5% E 14.5% E Foreign Exchange Reserves (US$ millions) 9,077 10,675 13,523 14,146 15,219 Exchange Rate Period Average (dirhams/US$) 3.6725 3.6725 3.6725 3.6725 3.6725 Annual % Growth 0.04 0.00 0.00 0.00 0.00 E: Estimate * Economic Overview, Country Watch Incorporated, 2005 UAE EXPORTS, IMPORTS AND TRADE BALANCE (US$ Millions) 1999 2000 2001 2002 2003 Exports 36.5 49.6 47.5 51.2 60.8 Of which: Crude oil 13.6 21.7 17.6 16.7 22.1 Imports, f.o.b. -27.9 -30.8 -33.5 -36.7 -41.7 Current account balance 0.9 12.2 6.5 3.5 6.9 In percent of GDP 1.6 17.3 9.4 4.9 8.5 Central bank reserves 10.9 13.8 14.3 15.3 15.1 In months of imports of goods and services 4.3 4.9 4.7 4.4 4.1 Total external debt 18.8 18.2 19.4 16.7 16.6 In percent of GDP 34 26 27.9 23.3 20.7 * IMF 2004 Article IV Consultation with UAE PAGE 35
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