The UAE’s broad economic remain on the upward trajectory, looking set for two more years of strong growth driven by its export-oriented non-oil sectors, analysts at a leading global bank said.
The economy is expected to retain its growth momentum, led by trade, transport, and tourism, with the broader service sector performing well as the population continues to expand, economist said.
“We are upbeat on the outlook for the UAE, where we expect non-oil activity to remain strong. The economy’s well-established infrastructure does not call for a surge in capital outlays of the same quantum that will boost growth in Saudi Arabia. With services exports a driver of growth, there is also a greater exposure to global weakness, particularly with demand for travel and tourism now above pre-Covid levels,” they said.
As per the bank’s research data, the UAE is on track to post a real gross domestic product growth of 4.0 per cent in 2024 after clocking 3.4 per cent growth in 2023. In 2024, the size of the Arab world’s second-largest economy will grow to $536.8 billion from $509.2 billion in 2023, and surge to $561.2 billion in 2025.
The economic expansion will have a positive impact on the nation’s per capita GDP, an economic metric that breaks down a country’s economic output per person. Economists use GDP per capita to determine how prosperous countries are based on their economic growth. As per MUFG research, the UAE’s per capita GDP is poised to grow to $52,407 in 2024 from $50,602 last year. In 2025, the GDP per capita will jump to 53,813.
The Central Bank of the UAE has revised the country’s 2024 growth projection from 4.3 per cent to 5.7 per cent as Opec+ announced significant increases in oil production next year. The International Monetary Fund has forecast that the UAE’s real GDP will grow by 4.0 per cent in 2024 — a projection in line with that of the World Bank’s estimate. The IMF expects that the UAE’s current account balance to be about 7.7 per cent of GDP in 2024.
There has been a marked increase in capital spending awards over the past two years. The government has no financing needs over the next two years, given healthy surpluses as well as significant cash excess. It is likely to continue to finance any upcoming bond maturities from these, although the possibility of some issuance for debt management purposes is not ruled out entirely, the MUFG research report said.
“The cyclical expansion is underpinned by a raft of structural reforms that we judge have already pushed sustainable non-oil growth rates toward five per cent. Though focused on the domestic operating environment, the changes are reinforced by a renewed openness to trade and capital flows – a stance underscored by the decision to join Brics,” said Khoman.
Across the Middle East, the outlook is shielded by global uncertainties while growth remains well-anchored by rapid diversification agendas, with inflation low, public finances strong and balance of payments robust. “Coupled with ample balance sheet strength and resilient creditworthiness, the region has considerable access to international capital markets as well as policy flexibility that few other emerging (and certainly developed) markets, enjoy. However, as external headwinds will likely stiffen in 2024, the divergence in regional prospects will become apparent,” the bank said.
In the GCC, analysts continue to see Saudi Arabia as the most compelling economic story. “The kingdom is undergoing an unprecedented transformation with $1.0 trillion in Vision 2030 project commitments and rapid demographic shifts. We look for the state to draw down its balance sheet to meet any initial funding gaps as with debt so low, policymakers will enjoy considerable flexibility even if oil prices drop.”
On Qatar, the analysts remain positive on a performance that will continue to be anchored by its well-advanced plans for the next phase of its gas development. “Near term, this should see investment continue to push higher, with the strength of support from international partners ensuring global conditions will not constrain access to capital.”
The outlook for Oman is nuanced. A change in leadership in 2020 coupled with the shock of Covid triggered significant institutional reform and a focus on restoring control to public finances – delivering marked returns with the debt stock falling from 70 per cent in 2020 to 40 per cent in 2023.
The headwinds facing Bahrain are pronounced, they said. “Encouragingly, strong current account surpluses over the past two years have allowed it to rebuild reserves that were close to exhaustion three years ago,” they said.
The biggest questions, Khoman and Ramya say, hang over the outlook for Kuwait. “Having seen the standoff between parliament and the executive stall most aspects of policy for so long that development has been left lagging the rest of the region, any improvement in governance could yield quick gains, particularly given the vast wealth the sovereign commands.”
