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CBUAE upgrades 2024 growth outlook: The Central Bank of the UAE (CBUAE) upgraded its growth outlook for 2024 for the third time this year, penciling in 4% growth, up from its 3.9% June projection, according to its Quarterly Economic Review (pdf).
The CBUAE attributed the adjustment to the “improved performance of the oil sector,” with other industries also expected to buoy growth including tourism, transport, financial services, ins., construction, real estate, and communication.
The oil sector is now expected to grow 0.7% in 2024, up 0.4 percentage points from the previous 0.3% projection, with a 3.3% increase in gas and non-oil fuels and a 0.6% decline in oil output. In 2025, the sector is expected to grow a lot more — but less than previously expected, with the central bank revising its growth forecast for the sector down to 7.7% in 2025, compared with its previous 8.4% forecast.
REMEMBER- The UAE’s oil production has been inching up slightly in recent months, as the country looks to boost production in line with increasing capacity. Opec+ granted the UAE a higher production quota of 3.5 mn barrels per day in 2025, up from the current 2.9 mn, and had allowed Opec countries to begin to ease supply cuts starting October — but later scrapped the plans as oil prices continued to fall.
The UAE’s ins. sector saw strong growth in 1H 2024, with gross written premiums up 31.2% y-o-y to AED 35.7 bn, driven by property and liability (+39.4%), health (+30.7%), and life insurance premiums (+9.1%). Gross claims paid jumped 34% to AED 18.9 bn, fueled by a 46.2% rise in property claims and a 150% increase in life ins. claims.
On the other hand, the non-oil sector’s growth forecast was revised down to 5.2% this year, down from its earlier 5.4% projection. It sees the sector growing 5.3% in 2025, largely driven by the government’s “strategic plan and policies” to attract foreign direct investment. Another key factor the central bank sees propelling the non-oil industry is the introduction of full foreign ownership of companies and tax reforms.
The CBUAE lowered its inflation forecast for 2024 to 2.2%, down from its previous projections of 2.3% in June.
The central bank dialed back its forecast for growth in 2025, penciling in 6% growth, driven by sustained growth in the non-oil sector and a rise in oil production, down from a 6.2% projection in June.
What headwinds lie ahead? Potential escalations in geopolitical tensions and Opec’s oil production cuts could possibly weigh on growth, the central bank said. On the flip side, a “faster-than-expected reduction in interest rates in the major advanced economies” could lead to positive outcomes such as boosting global demand and attracting capital inflows into emerging markets like the UAE.
