We’re going to have a good 2024

Higher growth ahead: The Central Bank of the UAE (CBUAE) revised upwards the country’s 2024 growth forecast to 5.7%, up from its September projection when it penciled in 4.3% growth for next year. The bank sees an expected rise in OPEC oil production boosting growth, according to the CBUAE’s Quarterly Economic Review report. The CBUAE also adjusted its 2023 growth forecast to 3.1%, from 3.3%, citing extended oil production cuts.

The CBUAE’s forecast matches the latest projections from the Arab Monetary Fund, which said in its Arab Economic Outlook (pdf) last month that the UAE is set to post the highest growth rate among GCC countries next year, penciling in 4.3% GDP growth in 2024.

Bouncing back after a slower 2Q: GDP growth slowed in 2Q 2023, coming in at 3.8%, compared to a robust 8% in 2Q 2022. Slowing growth came on the back of slower oil production, with the non-oil sector factoring more in the mix.

The non-oil economy is going strong, but oil production cuts bite: Non-oil GDP grew at a 7.3% clip in 2Q 2023, with the finance, construction, real estate, wholesale, and retail sectors all booming, the report reads. Oil GDP contracted 5.1% y-o-y in 2Q 2023 on the back of OPEC production cuts that saw the country produce just 2.9 mn barrels per day.

The drop in the oil economy shouldn’t last long: Oil GDP should clock in at 8.1% in 2024, with production averaging 3.2 mn barrels per day, the central bank writes.

The government recorded a fiscal surplus of AED 47.4 bn in 1H 2023, equal to 5.2% of GDP, according to the report, but government revenues dipped 19.2% y-o-y to AED 246.9 bn. Total government expenditures for the first half came in at AED 199.5 bn, an 8.3% increase on the same period last year.

The CBUAE sees inflation dipping to 2.4% from 2.8% this year. The adjustment was based on falling food prices and a strong AED, which outweighed a slight uptick in housing prices. It is penciling in inflation at 2.1% in 2024, citing global disinflationary patterns.That’s a bit lower than the AMF, which sees inflation settling at 2.6% next year. The UAE has navigated inflation through interest rate hikes, capitalizing on advantages such as key trade partners’ higher inflation rates, and the strength of the AED against the USD. The AED’s performance makes imports, especially food, less expensive, the report says.

How do our neighbors compare? The 2024 outlook, per the AMF:

• Oman: +3.6% (the fastest in the region)
• Saudi Arabia: +2.8%
• Qatar: +2.8%
• Kuwait: 2.5%
• Bahrain: -2.9%