UAE to Attract $160 Bln in New Economy Investments over Next Three Decades

Two employees in Strata Manufacturing check up a locally manufactured component of satellites. (WAM)
Two employees in Strata Manufacturing check up a locally manufactured component of satellites. (WAM)
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UAE to Attract $160 Bln in New Economy Investments over Next Three Decades

Two employees in Strata Manufacturing check up a locally manufactured component of satellites. (WAM)
Two employees in Strata Manufacturing check up a locally manufactured component of satellites. (WAM)

UAE Minister of Economy Abdullah bin Touq Al Marri said that the UAE aims to attract $160 billion worth of investments in new economic sectors over the next three decades.

 

The minister affirmed that the growth potential of the global economy is linked to creating more investment opportunities in new economic sectors, including the space industry, food, agriculture, healthcare, transportation, renewable energy, circular economy models, and advanced technology, as well as investing in digital infrastructure development and employing artificial intelligence and virtual reality technologies, to enhance their contribution to economic growth.

 

The minister added that the UAE aims to become a global model of green growth and circular economy, contributing to sustainable economic growth through cooperation with partners, to open new markets for national exports, enhance the competitiveness of the national economy, and improve the business environment.

 

During the “Make it in the Emirates Forum,” Al Marri stressed that the industrial and manufacturing sector is a priority and a key pillar for strengthening the soft power of the national economy and enhancing its competitiveness in international markets, WAM reported.

 

He also noted that the national industry is capable of competing in regional and global markets in various sectors, such as aviation, transportation, logistical services, renewable energy, mining, food, petrochemicals, pharmaceuticals, and others.

 

Al Marri stated that the ministry is working in collaboration with its strategic partners on several initiatives and policies to create investment opportunities in new economies while continuing efforts to create an appropriate environment for start-ups and family businesses.

 

He also explained that the UAE achieved record growth in 2022, with a GDP growth rate of 7.6 percent, one of the highest economic growth rates in the world.

 

Projections for 2023 indicate that the national economy will continue to grow at 3.9 percent, with non-oil output growth at 4.2 percent, according to estimates by the Central Bank of the UAE.

 

The percentages are expected to increase in 2024, reaching 4.3 percent for GDP and 4.6 percent for non-oil output.

 



Year of War Creates Cracks in Israel's Borrowing Strength

The Bank of Israel building is seen in Jerusalem June 16, 2020. REUTERS/Ronen Zvulun/File Photo
The Bank of Israel building is seen in Jerusalem June 16, 2020. REUTERS/Ronen Zvulun/File Photo
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Year of War Creates Cracks in Israel's Borrowing Strength

The Bank of Israel building is seen in Jerusalem June 16, 2020. REUTERS/Ronen Zvulun/File Photo
The Bank of Israel building is seen in Jerusalem June 16, 2020. REUTERS/Ronen Zvulun/File Photo

Israel's economy has for almost a year ridden out the chaos of a war that risks spiralling into a regional conflict, but rising borrowing costs are starting to strain its financial architecture.

The direct cost of funding the war in Gaza through August was 100 billion shekel ($26.3 billion), according to the finance ministry. The Bank of Israel reckons the total could rise to 250 billion shekel by the end of 2025, but that estimate was made before Israel's incursion into Lebanon, which will add to the tally.

That has led to credit ratings downgrades, which are amplifying economic effects that could reverberate for years, while the cost of insuring Israel's debt against default is near a 12-year high and its budget deficit is ballooning, Reuters reported.

"As long as the war continues, the sovereign debt metrics will continue to worsen," said Sergey Dergachev, portfolio manager at Union Investment.

Although Israel's debt-to-GDP, a core metric for economic health, stood at 62% last year, borrowing needs have blown out.

"Even if Israel has a relatively good base, still it will be painful on the fiscal side," Dergachev said, adding: "And over time, it will put pressure on the rating."

Israel's finance minister has said the economy is strong, and the country's credit ratings should rebound once the war has ended.

The cost of the war is steep due to Israel's Iron Dome air defenses, large-scale troop mobilization and intensive bombing campaigns. This year, debt-to-GDP hit 67%, while the government deficit is 8.3% of GDP, well above the 6.6% previously expected.

While the core buyers of Israel's international bonds - pension funds or major asset managers lured by its relatively high sovereign debt rating - are unlikely to shed the assets at short notice, the investor base has narrowed.

Privately, investors say there is increasing interest in offloading Israel's bonds, or not purchasing them, due to concerns over the ESG implications of how the war is conducted.

Norges Bank sold a small holding in Israeli government bonds in 2023 "given increased uncertainty in the market," a spokesperson for Norway's sovereign wealth fund said.

"What you do see reflecting these concerns is obviously the valuations," said Trang Nguyen, Global Head of Emerging Markets Credit Strategy at BNP Paribas, adding Israeli bonds were trading at far wider spreads than similarly rated countries.

Asked about rising borrowing costs and investors' ESG concerns for this story, Israel's finance ministry did not immediately respond to a request for comment.

While Israel's domestic bond market is deep, liquid and expanding rapidly, foreign investors have pulled back.

Central bank data shows the share held by non-residents declined to 8.4%, or 55.5 billion shekels, in July from 14.4%, or nearly 80 billion shekels, in September last year. Over the same period, the amount of outstanding bonds grew by more than a fifth.

"Israeli institutions actually are buying more during the last few months and I guess some global investors sold bonds because of geopolitics and uncertainty," a finance ministry official said, declining to be named.

Equity investors are also cutting back. Data from Copley Fund Research showed that international investors' cuts to Israel funds, which began in May 2023 amid disputed judicial reforms, accelerated after the Oct. 7 Hamas attacks.

Global funds' ownership of Israeli stocks is now at its lowest in a decade.

Foreign direct investment into Israel dropped by 29% year-on-year in 2023, according to UNCTAD - the lowest since 2016. While 2024 figures are not available, ratings agencies have flagged the war's unpredictable impact on such investment as a concern.

All this has amplified the need for local investment, and government support.

The government in April pledged $160 million in public money to boost venture capital funding for the crucial tech sector, which accounts for some 20% of Israel's economy.

This adds to other costs, including housing thousands displaced by the fighting, many in hotels vacant due to the steep drop in tourists.

The displacements, worker shortages due to mobilization and Israel's refusal to allow Palestinian workers in, are hindering its agriculture and construction sectors.

The latter has been a key factor curtailing economic growth - which plunged more than 20% in the fourth quarter of last year and has yet to recover. Data from the three months to end-June show seasonally adjusted GDP remained 1.5% below pre-attack levels, Goldman Sachs calculations show.

Israel has thus far had little trouble raising money. It sold some $8 billion of debt on international capital markets this year. Its diaspora bond vehicle, Israel Bonds, is targeting a second annual record haul above $2.7 billion.

But rising borrowing costs, coupled with rising spending and economic pressure, loom.

"There is room for Israel to continue muddling through, given a large domestic investor base that can continue to fund another sizeable deficit," said Roger Mark, analyst in the Fixed Income team at Ninety One.

"However, local investors are looking for at least some signs of consolidation efforts from the government."