Prediction has always been a tough business. But economists and analysts say it has become a game increasingly fraught with error amid spreading uncertainty about the fate of global and regional economies.
"The volatile economic climate is dealing economists a difficult hand at the moment," says Daniel Kaye, an economist at the National Bank of Kuwait. "Economists were blamed for not seeing this crisis in the first place, but now that it's happened, it's fair to say we do live in a more unpredictable world than a few years ago. The outlook is fairly uncertain, and nobody can be truly sure about what's going to happen next."
That lack of certainty is abundantly clear in measurements of the accuracy of global and regional forecasts. Bloomberg's index of analyst accuracy in predicting the profits of the US's largest companies sagged to its lowest point in late 2008 and remains at historic lows. About 8.2 per cent of analysts correctly predicted US company earnings in this year's first quarter, down from above 30 per cent at the end of 2000.
Predictions about GDP growth in the Gulf tell a similar story. In late 2008, the IMF predicted the UAE's economy would grow by a healthy 6 per cent in 2009. In its most recent global outlook, however, the fund estimated the country's economic output last year actually declined by 0.7 per cent, a dramatic swing that economists say reflects the growing difficulty of making forecasts. The IMF has made an even more radical downwards revision of its view for GDP growth in Kuwait and Qatar last year - by 8.5 percentage points and 12.4 percentage points, respectively.
A dearth of good statistics for the region is in part the cause of the wide fluctuation in forecasts, economists say. Many Gulf countries release official economic growth figures just once a year, forcing economists and analysts to use anecdotal estimates and global patterns to make their mid-year predictions.
The UAE generally follows this pattern, although Sultan al Mansouri, the Minister of Economy, periodically updates the Government's outlook.
"Most countries in the region only publish GDP figures once a year, so that makes the scope for error even greater," Mr Kaye says.
Against that backdrop, global surprises such as Europe's recent debt crisis and the ensuing drive towards fiscal austerity have only clouded regional economists' already-murky crystal balls.
Given the Gulf's tighter links with the global economy - links that were painfully exposed at the onset of the financial crisis, when many commentators had hoped the region's big oil reserves would insulate it from trouble in western economies - the potential for a shaky world outlook sending tremors through local economies has become an important factor in predictions.
"When there are major unanticipated shocks to the system, both at the global level and the local level, it can fundamentally change the present and thus require us to think again about where we're headed," says Simon Williams, the chief economist for the Gulf at HSBC, who is projecting 2 per cent GDP growth for the UAE this year, ahead of the IMF's 1.3 per cent prediction.
"But I think it's then the role of the forecaster to understand the drivers and to gauge where they're taking the economy to, whether we're talking about the UAE, the UK or the US. The lack of timely and reliable data here makes that job harder, but I don't think it prevents you as an analyst from picking out the narrative. A forecaster should understand what the key drivers are, what impact they're having and how that affects growth."
Opinions vary on how precise economists' estimates ought to be on GDP growth, inflation, company profits and other standard economic figures for the region. Some economists say they avoid precise forecasts or build in margins of error because they want their reports to reflect their underlying uncertainty.
Others are comfortable coming up with numbers, but they emphasise that their estimates should be taken more as guides than as firm predictions. In the GCC, as in other emerging markets where data are scarce and economic indicators volatile, analysts say forecasting is more about constructing an overarching narrative of growth than pinning down specific numbers.
"In general, it's not easy to forecast," says John Sfakianakis, the chief economist at Banque Saudi Fransi. "Usually, we try to put a lot of emphasis on forecasting and how accurate we are, but as an economist you can only forecast accurately the trends over the next three to six months and say the economy is either growing or not growing."
Beyond that, he says, "you're becoming a fortune-teller or astrologer rather than an economist".
So should the public trust the forecasts that the region's economists produce? Mr Sfakianakis says people should look at economists' analysis more closely than their figures. He also notes that most economists in the Gulf, including himself, are employed by banks that may defend their commercial interests to the exclusion of blunt economic assessments, especially when they involve less-than-stellar forecasts.
"The world should be looking less to economists to explain things," he says. "And I think economists in the region have to be more down to earth when it comes to predicting things because they have very little to play with and have access to."
afitch@thenational.ae
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UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
Pearls on a Branch: Oral Tales
Najlaa Khoury, Archipelago Books
Disclaimer
Director: Alfonso Cuaron
Stars: Cate Blanchett, Kevin Kline, Lesley Manville
Rating: 4/5
'Unrivaled: Why America Will Remain the World’s Sole Superpower'
Michael Beckley, Cornell Press
Greatest Royal Rumble results
John Cena pinned Triple H in a singles match
Cedric Alexander retained the WWE Cruiserweight title against Kalisto
Matt Hardy and Bray Wyatt win the Raw Tag Team titles against Cesaro and Sheamus
Jeff Hardy retained the United States title against Jinder Mahal
Bludgeon Brothers retain the SmackDown Tag Team titles against the Usos
Seth Rollins retains the Intercontinental title against The Miz, Finn Balor and Samoa Joe
AJ Styles remains WWE World Heavyweight champion after he and Shinsuke Nakamura are both counted out
The Undertaker beats Rusev in a casket match
Brock Lesnar retains the WWE Universal title against Roman Reigns in a steel cage match
Braun Strowman won the 50-man Royal Rumble by eliminating Big Cass last
Kanguva
Director: Siva
Stars: Suriya, Bobby Deol, Disha Patani, Yogi Babu, Redin Kingsley
Wicked
Director: Jon M Chu
Stars: Cynthia Erivo, Ariana Grande, Jonathan Bailey
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The specs
Engine: Long-range single or dual motor with 200kW or 400kW battery
Transmission: Single-speed automatic
Max touring range: 620km / 590km
Price: From Dh250,000 (estimated)
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If you go
Where to stay: Courtyard by Marriott Titusville Kennedy Space Centre has unparalleled views of the Indian River. Alligators can be spotted from hotel room balconies, as can several rocket launch sites. The hotel also boasts cool space-themed decor.
When to go: Florida is best experienced during the winter months, from November to May, before the humidity kicks in.
How to get there: Emirates currently flies from Dubai to Orlando five times a week.
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
In numbers
1,000 tonnes of waste collected daily:
- 800 tonnes converted into alternative fuel
- 150 tonnes to landfill
- 50 tonnes sold as scrap metal
800 tonnes of RDF replaces 500 tonnes of coal
Two conveyor lines treat more than 350,000 tonnes of waste per year
25 staff on site
The specs
Engine: 3.0-litre twin-turbo flat-six
Power: 480hp at 6,500rpm
Torque: 570Nm from 2,300-5,000rpm
Transmission: 8-speed dual-clutch auto
Fuel consumption: 10.4L/100km
Price: from Dh547,600
On sale: now
The specs
Engine: 2-litre or 3-litre 4Motion all-wheel-drive Power: 250Nm (2-litre); 340 (3-litre) Torque: 450Nm Transmission: 8-speed automatic Starting price: From Dh212,000 On sale: Now
COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
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2024%20Dubai%20Marathon%20Results
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Business Insights
- Canada and Mexico are significant energy suppliers to the US, providing the majority of oil and natural gas imports
- The introduction of tariffs could hinder the US's clean energy initiatives by raising input costs for materials like nickel
- US domestic suppliers might benefit from higher prices, but overall oil consumption is expected to decrease due to elevated costs
THE%20HOLDOVERS
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From Zero
Artist: Linkin Park
Label: Warner Records
Number of tracks: 11
Rating: 4/5
The%20specs
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Honeymoonish
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Match info
Uefa Champions League Group H
Juventus v Valencia, Tuesday, midnight (UAE)
Citadel: Honey Bunny first episode
Directors: Raj & DK
Stars: Varun Dhawan, Samantha Ruth Prabhu, Kashvi Majmundar, Kay Kay Menon
Rating: 4/5
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Nayanthara: Beyond The Fairy Tale
Starring: Nayanthara, Vignesh Shivan, Radhika Sarathkumar, Nagarjuna Akkineni
Director: Amith Krishnan
Rating: 3.5/5