First Abu Dhabi Bank (FAB) expects the UAE’s GDP to grow 4%in 2024 on the back of expansion in the non-oil economy, the bank said in its UAE fixed income report (pdf). On the flipside, the oil sector is set to contract as a result of the temporary oil cuts in Saudi Arabia and lower oil prices, the Emirates’ biggest lender said, expecting the UAE’s economy to stay resilient and outperform emerging market economies.”

How FAB’s projection compares to the rest of the class: The World Bank expects to see 3.7% growth in 2024, up from the previous estimate of 3.4% in the June edition of its report, while The Arab Monetary Fund sees the economy growing at a 4.3% clip. On the more bullish side, S&P Global expects the economy to accelerate to more than 5%, while the Central Bank of the UAE expects it to grow 5.7% and the Finance Ministry projects 5.3% growth.

The rationale: The “UAE’s non-oil PMI indicators suggest solid underlying momentum,” FAB writes, citing S&P Global’s purchasing managers’ index (PMI), which has been running above the 50 threshold that separates growth from contraction since 2020. Activity in the UAE’s non-oil private sector expanded again in January, with the index hitting 56.6.

Dubai’s non-oil economy reeled in liquidity for the emirate, helping it deleverage over the past two years, driven by its “strong business momentum particularly in services, retail, tourism, real estate and construction,” the report said. The lender expects the emirate to book a 4.6% fiscal surplus for FY 2023, according to its Investment Outlook 2024 report (pdf).

DEBT MARKET OUTLOOK-

The bank also has a positive credit outlook for the UAE in 2024 on the back of “robust credit fundamentals and a diverse investor base,” it said in its fixed income report. All-in yield values are at a 10-year high, and an anticipated tapering of US treasury yields indicates positive returns for UAE credits, the report added.

The country faces some USD 20 bn in bond maturities, which is another indicator that the bond market will remain liquid and active during the year, the report noted.

THE REGIONAL ANGLE-

The Emirati lender expects the GCC region to experience 3.4% growth in the medium term, “driven by the domestic multi-year investment cycle, particularly in Saudi Arabia, supported by various reforms being implemented in GCC countries,” as well as a string of anticipated IPOs, according to the report. GCC equities are also expected to have a good year despite expected market volatility, as global inflation subsides and the Fed ends its monetary tightening cycle.

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