Boston, MA -- (ReleaseWire) -- 04/11/2014 -- Final-year sales data for 2013 were unavailable as this report was being compiled. Consequently, BMI retains its current forecasts this quarter, although we have now extended our forecast period out to 2018. Overall, BMI retains an optimistic outlook on new vehicle sales in the UAE, forecasting further growth of over 25% over the 2014-2018 period.
Underpinning our upbeat stance is BMI's positive view on the medium-term outlook for the UAE economy. At the end of November 2013, we revised up our forecasts for Dubai's economy on the back of the emirate winning the nomination to host the World Expo 2020. We continue to expect Dubai to become the key driver of the UAE's economic growth, as the emirate's non-oil sector expands substantially, especially given the economic boost of holding the Expo. In contrast, we expect Abu Dhabi will see GDP growth constrained by moderate increases in oil output and lower oil prices.
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For the UAE as a whole, we are targeting 3.4% GDP growth in 2014 and we expect economic activity across the country to remain relatively robust over the coming quarters. The risks to our outlook are relatively small and well balanced. On the upside, any progress in talks between the US and Iran that lead to a reduction in sanctions would benefit the UAE, and in particular Dubai, given the importance of the reexport trade. On the downside, a sharper than expected decline in oil prices, or any unplanned outages in oil production, would pose the most significant threat to our forecasts.
Encouragingly for the auto sector, consumer sentiment is picking up, with prices across real estate and equity markets having started to head higher in recent months, which bodes well for the prospects of a positive wealth effect. One final encouraging factor for the autos market is the increase in migration from neighbouring states following the Arab Spring. With public transport still inadequate in Dubai, car purchases are being seen as immediate priorities for new residents.
One potential downside risk to our forecasts is posed by rising inflation, which BMI forecasts to average 2.2% in 2014. According to latest data from the National Bureau of Statistics (NBS), CPI across the country stood at 1.5% in January. This could potentially see the Central Bank of the UAE look to move rates up from their current record low of 1%, which in turn could impact those UAE residents requiring loans to make vehicle purchases.
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