UAE Economic Growth Expected to Remain Steady Despite OPEC+ Cuts
The Central Bank of the UAE has released its latest quarterly report, which forecasts that the country’s economy will maintain its projected growth rate of 4.3 percent in 2024. The report states that a rebound in both oil and non-oil activities will contribute to this steady growth rate. The CBUAE predicts that the country’s oil and non-oil gross domestic product will grow at 3.5 percent and 4.6 percent, respectively, in 2024.
Stability and Adherence to Production Levels
The CBUAE’s decision to keep the 2024 growth forecast unchanged reflects the stability and adherence to the agreed-upon production levels in the oil market. This contributes to a balanced and sustainable economic outlook for the UAE. Despite reducing the projection for 2023 by 0.6 percentage points to 3.3 percent due to oil production cuts agreed among OPEC+, the UAE’s central bank notes that the country’s economy continued to grow steadily during the first three months of the year.
Robust Non-Oil Sector Performance
The CBUAE reports that the UAE’s non-oil sector continued to perform well during the first quarter of 2023, contributing to steady economic growth. The non-oil sector is expected to continue supporting aggregate output, albeit at a more modest pace compared to 2022. The CBUAE revised its non-oil GDP growth projection for 2023 upward to 4.5 percent from 4.2 percent.
Oil GDP Growth Moderates
Following a solid performance in 2022 with a growth rate of 9.5 percent, supported by an average daily oil production of 3.1 million barrels, the oil GDP growth in the first quarter of 2023 is estimated to have moderated to 3.1 percent year on year following the agreements of OPEC+. The report notes that the non-oil sector in the UAE is anticipated to have experienced a slightly lower growth rate in the first quarter of 2023, following a robust expansion of 7.2 percent in 2022.
Factors Affecting Future Performance
The CBUAE cautions that performance in 2023 and 2024 is subject to several factors, including 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.
Revenue Increase in 2022
In 2022, the UAE experienced a substantial revenue increase of 596.8 billion dirhams ($162.4 billion), representing a growth rate of 27 percent compared to the previous year. This increase was primarily attributed to higher total tax receipts and social contributions.
Conclusion
Overall, the CBUAE’s latest quarterly report suggests that the UAE’s economy is expected to maintain steady growth despite OPEC+ cuts. The rebound in both oil and non-oil activities is predicted to contribute to this growth, with the non-oil sector continuing to support aggregate output. While there are several factors that could affect future performance, the UAE’s adherence to agreed-upon production levels in the oil market is contributing to a balanced and sustainable economic outlook.