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UAE economic growth to accelerate in 2022, 2023: Swiss bank

The UAE’s economic growth is projected to accelerate from 1.4 per cent in 2021 to 4.3 per cent in 2022 and 5.2 per cent next year, according to UBS’ latest report.

The UAE’s real GDP growth is projected to accelerate in 2022 and 2023, led by an expansion in domestic credit, current account surplus amidst high oil prices and growth in non-oil sectors, says a new study.

The UAE’s economic growth is projected to accelerate from 1.4 per cent in 2021 to 4.3 per cent in 2022 and 5.2 per cent next year, according to UBS’ latest report.

The Swiss bank’s growth forecast for the UAE economy is higher for 2022 and 2023 and lower for 2021 than the International Monetary Fund’s (IMF) prediction released last week. IMF said the UAE economy grew 2.3 per in 2021, but the growth will accelerate to 4.2 per cent in 2022 and slow down again to 3.8 per cent in 2023.

Non-oil economy expansion

According to S&P Global’s PMI survey data, the UAE’s non-oil economy recorded strong expansion in March, underpinned by sustained strong output growth.

The rate of new business growth at UAE non-oil firms remained close to the post-pandemic high seen in November 2021. While domestic sales were the main driver of growth and there was also a modest expansion in the new export business, showed S&P Global PMI data. The strong rise in demand fed through to a substantial increase in business activity during March, with nearly a quarter of surveyed firms signalling output growth.

Economists forecast that the domino effect of the recently-concluded highly successful Expo 2020 Dubai will be felt this year and the next in the form of strong foreign direct investment in strategic sectors such as real estate, retail, tourism and hospitality.

Solid expansion

Emirates NBD Research said survey data for the first quarter of the year has pointed to a solid expansion in non-oil sectors, with strong growth in business activity and new work in the UAE, Saudi Arabia and Qatar.

“For Dubai in particular, Expo 2020 has helped to boost activity over its duration, and the relaxation of travel restrictions has contributed to a strong recovery in the tourism and hospitality sector over the same period. International visitor numbers have recovered to around 70 per cent of pre-pandemic levels in the first couple of months of this year,” said Emirates NBD in a note.

Khatija Haque, head of research and chief economist at Emirates NBD Research, said overall, the outlook for the UAE and the region remains constructive.

“Expected fiscal surpluses will allow governments to spend as planned without needing to tap debt markets in a rising interest rate environment. Recent reforms to the personal and business laws in the UAE will likely continue to drive inward investment and attract talent,” she said.

GDP boost

The Swiss bank UBS sees GDP jumping from $407 billion in 2021 to $440 billion in 2022 and $467 billion next year. Similarly, per capita GDP will also expand from $43,868 last year to $46,665 this year and $48,822 in 2023.

The oil sector is estimated to expand at 5.6 per cent this year and 7.2 per cent in 2023 while the non-oil sector will grow 3.8 per cent and 4.2 per cent in 2022 and 2023, respectively.

While consumer price index is expected to stay steady next year at 1.9 per cent as compared to 2.0 per cent in 2022.

The UBS report projected that the UAE will post a 12.2 per cent current account surplus in 2022 and 12.4 per cent in 2023. It projected a 4.0 per cent increase in credit in 2022 and 6.0 per cent in 2023.

— waheedabbas@khaleejtimes.com