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Leading UAE bank upgrade's nation's growth forecast

Emirates NBD sees the UAE economy 'remarkably resilient' to high interest rates

Emirates NBD on Wednesday upgraded its non-oil growth forecast for the UAE this year to 5.0 per cent from 4.5 per cent earlier, taking headline GDP growth to 3.7 per cent from 3.3 per cent previously.

“We assume no growth in the oil and gas sector this year as oil production is likely to remain constrained by Opec+ production limits. If there is an increase in the UAE’s target production level, this would pose an upside risk to our headline GDP growth forecast,” Khatija Haque, Emirates NBD’s head of research and chief economist, said in a note.

The bank noted that the UAE’s economy has been “remarkably resilient” to both a lacklustre external backdrop as well as significantly higher interest rates in 2023. “We now expect only a modest easing in monetary policy from the Fed towards the end of this year, with a total of 50 basis points in rate cuts pencilled in between September and December. This is likely to weigh on private sector investment this year,” Haque said.

However, the bank expects public sector investment – particularly in transport and other infrastructure – to remain robust in 2024 and beyond, as the government has announced several large long-term projects including the expansion of the Etihad Rail network and Al Maktoum Airport. “This will continue to underpin non-oil GDP growth in our view, offsetting any moderation in private sector investment and household consumption,” Haque said.

For Dubai, the figures show 3.3 per cent growth in Dubai’s GDP last year, with transport, logistics and hospitality driving the emirate’s economy in 2023, followed by information & communication (ICT) and real estate services. Manufacturing and wholesale and retail trade both grew at a slower pace in Dubai than at the national level, Emirates NBD research showed.

Emirate level data show that Abu Dhabi’s non-oil GDP grew 9.1 per cent in 2023, only fractionally slower than the 9.2 per cent growth recorded in 2022. The key sector growth rates for Abu Dhabi were similar to the UAE, although wholesale and retail trade grew at a robust 7.9 per cent in Abu Dhabi last year, compared with 3.9 per cent growth at a national level. With around half of Abu Dhabi’s GDP coming from hydrocarbons, the 3.1 per cent contraction in oil and gas GDP last year meant that headline GDP growth for Abu Dhabi slowed to 3.1 per cent in 2023 from 9.2 per cent in 2022.

The UAE’s economy grew 3.6 per cent in 2023, in line with Emirates NBD’s forecast, according to preliminary data. The non-oil sector grew by a faster than expected 6.2 per cent last year.

Financial services was the fastest growing sector in 2023, expanding 14.3 per cent year on year after 6.6 per cent growth in 2022. This was followed by transport and logistics (11.5 per cent year on year), construction and real estate services, data showed.