The UAE economy has successfully rebounded from the effects of the COVID-19 pandemic and garnered optimistic forecasts from international institutions and banks, including the IMF and World Bank. The United Arab Emirates (UAE) positions itself for a robust economic upturn, demonstrating resilience and prosperity amid global geopolitical uncertainties. The country’s track record of economic achievements as an innovation-driven economy bolsters its positive outlook.
The IMF projects a 3.6% increase in the UAE’s gross domestic product (GDP) this year, driven by vigorous domestic activity. Following an impressive growth rate of 7.9% in 2022, the IMF’s 2022 Article IV assessment anticipates the UAE’s economy to maintain its upward trajectory in 2023, benefiting from sustained tourism activity and increased capital expenditure.
Similarly, the World Bank forecasts a 2.8% growth in the UAE’s real GDP in 2023, with the non-oil sector expected to achieve robust growth of 4.8%. Strong domestic demand in sectors such as tourism, real estate, construction, transportation, and manufacturing will propel this growth.
UAE’s Resilient Economy and Growth Outlook
The World Bank’s Gulf Economic Update predicts an increase in the UAE’s current account balance to 11.7% in 2023 and a surplus in public finances of 6.2% in the same year.
These international assessments align with the Central Bank of the UAE’s quarterly economic review, affirming that the UAE’s economy continued to thrive in Q1 2023. The solid performance of the non-oil sector outweighed a moderation in the oil segment, sustaining the country’s economic momentum.
“For 2023, growth has been revised down by 0.6 percentage points to 3.3 per cent, reflecting oil production cuts agreed among OPEC+ members.“The non-oil sector is expected to continue to support aggregate output, albeit at a more modest pace compared to 2022.”
Several factors, including a notable increase in the Purchasing Managers’ Index (PMI) in May 2023, reaching its highest level in five months will drive continued growth in the UAE’s economy this year.
In May, the seasonally adjusted S&P Global UAE PMI, a comprehensive indicator reflecting operating conditions in the non-oil private sector economy, recorded a robust improvement with a reading of 55.5. Although it declined from April’s figure of 56.6, it remained above the threshold of 50.0, indicating growth, and exceeded its long-term average.
The rise in new business highlighted the growing confidence of surveyed firms in the economic outlook, according to S&P Global. Furthermore, expectations for future activity improved for the fifth consecutive month in May, reaching the highest level since late 2021.
The UAE will enhance trade, and integration into global value chains, and attract more foreign direct investment through its progress in implementing comprehensive economic partnership agreements, ultimately boosting national economic growth. These partnerships serve as significant drivers of economic expansion, creating opportunities for trade and investment while contributing to the vitality of regional and global economic flows.
