CBUAE revises downward its 2024 growth outlook: The Central Bank of the UAE (CBUAE) expects the economy will grow at a 4.2% clip in 2024, marking a downward revision of 1.5 percentage points from its December projection. The bank's revision is tied to the slow recovery of oil production following the OPEC+ agreement of voluntary oil output cuts in November, while the non-oil sector, although strong, is exhibiting signs of deceleration, according to the latest Quarterly Economic Review report (pdf).

The CBUAE sees growth accelerating to 5.2% in 2025, supported by steady growth in the non-oil economy and stable oil production levels towards the end of 2024.

The largest bank in the UAE had similar 2024 projections: First Abu Dhabi Bank anticipated last month that the UAE is poised for a 4% growth rate in 2024, primarily driven by the non-oil sector, while the oil sector is expected to contract due to temporary oil cuts in Saudi Arabia and declining oil prices.

The UAE's economy grew 2.5% in 3Q 2023, slowing down from 8.3% in 3Q 2022, primarily due to decelerating non-oil growth (contributing 75% to GDP) and additional oil production cuts.

Non-oil GDP growth slowed to 5.8% y-o-y in 3Q 2023, down from 7.3% in the previous quarter, primarily due to sluggish performance in financial and ins. services and manufacturing. However, this slowdown was partly offset by expansion in construction, transportation, storage, accommodation, and food services, the report reads. The central bank estimates that the non-oil sector’s growth will continue to decelerate to 4.7% in 2024 due to unfavorable base effects and a slowdown in demand caused by stabilized migration inflows.

Oil contraction continues well into the third quarter, with a 5.6% y-o-y decline, following a 5.1% drop in 2Q 2023 driven by OPEC+ cuts reducing output to 2.9 mn barrels per day. Oil production is expected to remain subdued until 3Q 2024, according to the report.

Oil GDP could contract to 2.9% in 2024, according to the CBUAE, a decrease from the previously estimated 8.1%, with an average production of 3 mn bpd. However, hydrocarbons are expected to increase by 6.2% in 2025.

The government recorded a fiscal surplus of AED 61 bn during 9M 2023, representing 4.4% of GDP, according to the report, but government revenues dipped 18.4% y-o-y to AED 370 bn. Total government expenditure for the first three quarters of 2023 came in at AED 309 bn, marking a 10.1% increase on the same period last year.

The CBUAE revised its inflation projection for 2024 to 2.5%, an increase from the previously projected 2.1% in December. The inflated figure is expected to come on the back of higher oil, wheat, and corn commodity prices as well as the expected depreciation of the USD as rate cuts loom, the report reads. The bank expects inflation to remain unchanged at 2.5% in 2025.

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