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UAE’s diversified economy set to sustain upward trajectory

Economic partnerships boost nation as a leading global trade hub

Powered by a vibrant non-oil sector, the economy of the UAE, the second largest in the Arab world, continues to demonstrate robust growth, the Organisation of the Petroleum Countries (Opec) said.

The UAE’s robust economic policies and strategic international partnerships place it in a strong position to sustain its upward trajectory and further diversify its economy, Opec said in its Monthly Oil Market Report for August 2024.

Opec’s growth outlook for the UAE aligns with the recent bullish forecasts made by the Arab Monetary Fund (AMF), the World Bank, the International Monetary Fund, and the Central Bank of the UAE.

The AMF projected the UAE economy to record a 6.2 per cent growth in 2025 after achieving a 3.9 per cent jump in the current year.

All the forecasts underscore that the growth will be mainly driven by continued improvements in tourism activity, real estate, and international trade, increased capital spending, and ongoing efforts to support the economy, including developments in high-tech industries.

Opec report noted that the UAE’s housing, water, electricity, gas, and other fuels – constituting over 40 per cent of the Consumer Price Index (CPI) – saw a slight increase, reaching 6.7 per cent year-on-year in June, up from 6.6 per cent in May.

Food and beverage inflation remained relatively stable, with a minor increase to 2.4 per cent YoY in June, up from 2.3 per cent YoY, in May, Opec said. “In terms of international economic relations, the UAE Central Bank recently signed currency swap agreements with Ethiopia, the Seychelles, and Indonesia. These agreements are designed to facilitate cross-border transactions and enhance payment system cooperation,” it said.

Economists point out that a series of Comprehensive Economic Partnership Agreements (Cepa) that the UAE has signed with its partner countries aimed at eliminating tariffs and boosting trade has helped position the country as a leading global trade hub. The latest Cepa the UAE has signed is with Mauritius.

They observed that the UAE’s economy shows strong fundamentals supported by a dynamic non-oil sector and robust public and monetary policies aimed at maintaining economic development, financial stability, and the soundness of the financial sector,

The AMF said in its Arab Economic Outlook report that the growth of the UAE in 2024 will be mainly driven by continued improvements in tourism activity, real estate, and international trade, increased capital spending, and ongoing efforts to support the economy, including developments in high-tech industries.

The International Monetary Fund recently forecast 4.2 per cent growth while the CBUAE has said the country’s vibrant foreign trade performance would continue in 2024 and 2025, underpinning the projected GDP growth of 3.9 per cent in 2024 before accelerating to 6.2 per cent in 2025.

The UAE is actively pursuing accelerated growth with the aim of doubling its GDP to over $800 billion by the end of the decade as it continues to focus on developing its position as a global hub for business and finance. The country has been actively seeking bilateral trade deals and partnerships to drive its economic goals.

According to a Statista projection, the GDP of the UAE in current prices would continuously increase between 2024 and 2029 by in total $157.4 billion (+29.82 per cent) and after the sixth consecutive increasing year, the GDP is estimated to reach $685.15 billion and therefore a new peak in 2029.

The CBUAE has said the country’s vibrant foreign trade performance would continue in 2024 and 2025, underpinning the projected GDP growth of 3.9 per cent in 2024 before accelerating to 6.2 per cent in 2025. The apex bank revised in its June 2024 Economic Quarterly Review the inflation forecast for the country this year to 2.3 per cent, down from its previous projection of 2.5 per cent.

The CBUAE noted that the Arab world’s second-largest economy’s non-hydrocarbon GDP growth is expected to remain strong at 5.4 per cent in 2024 and 5.3 per cent in 2025, with the hydrocarbon sector set to grow by 0.3 per cent in 2024, followed by further expansion by 8.4 per cent in 2025.

In an economic update on the latest economic developments in the Middle East and North Africa region, the World Bank said it had raised its forecast for the UAE’s economic growth to 4.1 per cent in 2025 from its previous forecast of 3.8 per cent. The report also indicated that the UAE’s current account surplus is estimated to rise to 8.4 per cent in 2024 and 8.3 per cent in 2025, and that the country will achieve a surplus of 5.1 per cent in its fiscal balance.