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The UAE will be the “top performing” economy among GCC economies this year, with real GDP set to expand 3.9%, up from the 3.1% growth recorded in 2023, according to the World Bank’s latest Gulf Economic Update (pdf). Growth will outpace overall GCC growth, which is expected to come in at 2.8% in 2024 and 4.7% in 2025, according to the World Bank.
3.1%? Official data from the Federal Competitiveness and Statistics Center had pegged GDP growth at 3.6% last year, with oil GDP falling 3.1% and non-oil growth coming in at 6.2%, slightly different from the World Bank’s figures. According to the World Bank, non-oil GDP rose 5.4%, while oil GDP fell 2.7%.
The rationale: Oil GDP will grow 5.8%, while non-oil GDP is anticipated to grow 3.2%, buoyed by “strong performance in the tourism, real estate, construction, transportation, and manufacturing sectors,” the World Bank says. Overall GDP is expected to grow on the back of a “significant oil production hike” in the second half of the year, following a run of supply cuts enforced by Opec+ to stabilize prices.
Oil production hike? We know that OPEC+ is holding an online meeting next Sunday, where members of the alliance will discuss oil production output cuts and quotas for the rest of this year, Bloomberg reports. It is widely expected that the cartel will extend output reductions through 2H 2024 to stabilize the market and increase prices, with the decision to hold the meeting online reinforcing the expectation of continued cuts. Still, the UAE has been hoping to use up its spare capacity and is on track to hit its 5 mn barrels per day (bbl / d) oil capacity target — originally set for 2027 — by the end of 2025 or early 2026.
Growth will pick up again next year: The World Bank expects the economy to grow 4.1% next year, rising 0.2 percentage points from the current calendar year on the back of improved oil GDP. Oil output is “anticipated to ramp up aggressively” in the GCC in 2025, as Opec+ unwinds supply cuts.
The government’s fiscal surplus decreased by half to 5.6% of GDP in 2023 on the back of “decreased oil production as well as a decrease in government revenue from diminished tax and non-tax receipts,” the World Bank said.
On the upside, it is expected to maintain the highest fiscal surplus among GCC countries this year at 5.1%, on the back of an influx of revenues from the newly introduced 9% corporate tax, the report said.
Current account balance-to-GDP ratio came in strong at 9.1% last year — just a couple notches below the 11.7% that was recorded in 2022, and “supported by rising non-oil exports in tourism and trade service, from enhanced new trade agreements with key Asian and African markets.”
STRONGER REGIONAL GROWTH-
Growth in the GCC region is expected to pick up pace, with projections increasing from 0.7% in 2023 to 2.8% in 2024 and 4.7% in 2025, according to the World Bank. The region’s oil sector is forecast to grow at a 1.7% clip this year before “ramping up aggressively in 2025 to reach 6.9%,” while the non-oil segment is expected to expand by 3.6% in 2024.
Regional conflicts pose a downside risk: “Escalating regional conflicts could undermine investor confidence, disrupt trade, and impede growth,” the World Bank said, adding that “a slower-than-expected recovery in China may reduce oil prices and demand, adversely affecting both oil and non-oil sectors.”
