Central Bank of the UAE Keeps 2024 Growth Forecast Unchanged at 4.3%. In its quarterly economic review, the apex bank said that the UAE economy continued to grow at a solid pace in Q1 2023, “reflecting a strong performance of the non-oil sector, partially offset by a moderation in the oil segment of the economy. The Central Bank of the UAE has revised down growth for 2023 by 0.6 percentage points to 3.3%, reflecting oil production cuts agreed among OPEC+ members. It is expected that the non-oil sector will continue to support aggregate output, albeit at a more modest pace compared to 2022.
Throughout 2023, projections indicate a robust pace of growth for these products. The growth rate for Q1 2023 in terms of oil GDP, which experienced robust growth of 9.5% in 2022 with an average production of 3.1 million barrels per day, is estimated to have slowed down to 3.1% year-on-year, in alignment with the OPEC+ agreements.
Beginning in May 2023, OPEC made the decision to reduce UAE’s production by 144 thousand barrels per day, leading to a downward revision in the expected GDP growth for 2023, resulting in a negative growth rate of -0.3% and an average daily output of 2,950 thousand barrels per day.
UAE’s Growth Outlook: Central Bank Maintains 4.3% Forecast for 2024 Amid Solid Q1 Economic Performance
The CBUAE anticipates strong growth in other hydrocarbon products, such as natural gas liquids (NGL), which are not subject to the OPEC+ production agreements but contribute to oil GDP. Throughout 2023, projections indicate a robust pace of growth for these products. Looking ahead, the CBUAE forecasts a rebound in oil GDP growth, expecting a rate of 3.5% in 2024, according to WAM.
“Performance in 2023 and 2024 is subject to the evolution of the conflict in Ukraine, a faster than expected deceleration in global growth, further OPEC+ cuts or increases in oil production, and subdued production of other OPEC+ members,” the review reads.
“After expanding by 7.2% in 2022, the non-oil sector is estimated to have grown at slightly lower pace in Q1 2023. Despite the weaker performance in the first quarter of the year, the CBUAE revised its non-oil GDP growth upwards for 2023 to 4.5%, mainly due to an acceleration of private and public investment in the remainder of the year. Some of the major industry market players expect a further acceleration in travel and tourism. For 2024, the CBUAE projects the real non-oil GDP to expand by 4.6%, in line with global growth trends.”
UAE Government Reports Surplus and Private Sector Robustness in 2023
On UAE government investment and consumption in 2022, the report indicated that the consolidated fiscal balance recorded a surplus of AED 195.7B or 10.5% of the GDP, up from 4.5% in 2021. “Government revenues increased in 2022 by 27.0% to AED 596.8B due to higher total tax receipts and social contributions, being partially offset by a decline in other revenue. On the expenditure side, current spending declined by 1.0% compared to 2021, reaching AED 381.1B, compared to the 9.0% annual increase observed in 2021. Lower spending on goods and services, subsidies, grants, and other expenses attributed to the drop in expenses. Capital spending, measured by net investment in non-financial assets, decreased by 8.5% in 2022 to AED 20B. Total expenditures reached AED 401.7B, corresponding to a 1.4% drop compared to 2021.”
The Central Bank of the UAE has highlighted the robustness of the private sector, which remains vibrant and dynamic. The sector has been benefiting from various reforms aimed at increasing foreign direct investment (FDI) inflows and attracting top talent.
“The UAE’s PMI signalled expansion in the non-oil private sector for the 28th consecutive month, reaching 55.9 in March 2023 and averaging 55.3 in 2022,” said the report on the country’s Purchasing Managers Index.”
“New business growth was the quickest since October last year, encouraging firms to purchase inputs at the strongest rate in five years. Firms also continued to benefit from relatively mild cost pressures, though margins narrowed. The Dubai PMI pointed to an uplift in growth momentum at the end of the first quarter of 2023, as firms broadened capacity to support an expansion in output. Stronger increases in both jobs and inventories reflected the growth rates reaching multi-year records.
