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UAE economy expected to grow by 3.5% in 2023, 3.9% in 2024: UBS

Structural and social reforms and programmes launched recently by the UAE will be positive catalysts

Michael Bolliger, Chief Investment Officer, Emerging Markets at UBS Global Wealth Management, forecasts the UAE’s gross domestic product (GDP) to stand at 3.5 per cent in 2023, rising to 3.9 per cent in 2024.

In a statement to the Emirates News Agency (WAM), Bolliger shared the bank’s positive outlook on the UAE’s medium-term growth prospects, supported by strong demand for its oil exports and energy investments, while expecting a strong 4.5 per cent expansion for the non-energy part of the economy for this year.

The introduction of a 9 per cent corporate tax this year, following the adoption of 5 per cent value-added tax (VAT) in 2018, contributes to bolstering public finances, Bolliger stated, adding that these measures, along the established initiatives to further reduce the economy’s dependence on the hydrocarbon sector, will further diversify the economy.

“This, in turn, contributes to supporting macroeconomic stability as well as the country’s fiscal accounts and its balance of payment, further boosting the country’s attractiveness as a destination for foreign direct and portfolio investments,” he said.

Bolliger stressed that the UAE’s renewables sector has a bright future, as the country aims to reach net-zero carbon emissions by 2050 through expanding the share of renewables in its energy mix, investments in sustainable desalination technologies, and emission reduction in the overall economy.

The structural and social reforms and programmes launched recently by the UAE will be positive catalysts to support the country’s ability to structurally grow at a rate of around 4 per cent per annum, he explained, adding that “relying more on renewable energy domestically and improving the energy efficiency will free up more hydrocarbons for the export market, which will translates into positive effects for the UAE’s fiscal balance and its balance of payment.”

International corporates tend to consider corporate tax rates for their expansive investment decisions, Bolliger explained, noting to the UAE’s favourability in this regard, especially as it imposes one of the least corporate tax in the world, in addition to being among the countries that rank first in global competitiveness.

On hosting COP28, Bolliger said that the event offers a great opportunity for the UAE to help drive the global effort against climate change and to highlight its own net-zero strategy. “The UAE is among the most competitive regions globally in producing renewable energy, with the country hosting several of the world’s largest and most cost efficient solar power plants,” he added.

“In recent years, a number of landmark solar power projects, such as Al Dhafra Solar PV plant and Mohammed bin Rashid Al Maktoum Solar Park, have been initiated in the UAE. Such projects will help the country to harness its solar power capacity and support its energy transition journey,” Bolliger stated.

The Chief Investment Officer of Emerging Markets at UBS emphasised that global economic growth may witness a fall toward late 2023 or early 2024 due to highly restrictive monetary policy, adding that global economy is holding up longer than expected as consumer spending and labour markets continue to surprise positively.

“We expect inflation to continue to slow in the US and in Europe, ending the year above central bank targets before normalising by mid-2024. This should allow the US Federal Reserve, European Central Bank (ECB), Swiss National Bank (SNB), and Bank of England (BoE) to complete their hiking cycles by midyear, then stay on hold for some months before rate cuts become more likely toward end-2023 or early 2024,” Bolliger concluded.