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UAE to grow by 3.9% in 2024 on strong oil exports: UBS

Swiss bank expects a 4.5% expansion for the non-energy part of the economy this year

Published: Mon 4 Sep 2023, 6:10 PM

By
Issac John

Workers at an oil well in the UAE.

The UAE's gross domestic product (GDP) is on track to post 3.5 per cent growth in 2023, rising to 3.9 per cent in 2024 on the back of strong oil exports and energy investments, UBS Global Wealth Management has said.

The recent tax reforms and a series of initiatives rolled out by the UAE are expected to give a further fillip to the GDP uptick while helping to reduce the economy’s dependence on the hydrocarbon sector and boosting economic diversification.

Michael Bolliger, chief investment officer, emerging markets at UBS Global Wealth Management, said the introduction of a 9.0 per cent corporate tax this year, following the adoption of 5.0 per cent value-added tax (VAT) in 2018, is contributing to bolstering public finances.

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. He expects a strong 4.5 per cent expansion for the non-energy part of the economy this year while noting that global economic growth may witness a fall toward late 2023 or early 2024 due to highly restrictive monetary policy.

The UAE’s non-oil trade reached a record Dh1.239 trillion as its economy kept on track for a record-breaking performance this year. His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister and Ruler of Dubai, said last week that the country is facing its best ever economic year and hailed the UAE’s position as a global trading centre.

“As we said previously, 2023 will be the best economic year in the history of our country. The UAE will remain a major player in international trade to consolidate its position as one of the most important global centres linking the east of the world with its west and north with its south,” he said in a message on the social media.

According to data from Statista, the second largest Arab economy’s GDP in current prices is on target to continuously increase between 2023 and 2028 in total by $140.4 billion (+28.14 per cent). The GDP is estimated to surge to $639.34 billion in 2028.

The Central Bank of the UAE maintained its growth forecast unchanged at 4.3 per cent for 2024 in its quarterly economic review. After growing at 9.5 per cent in 2022, with an average production of 3.1 million barrels per day, the country’s oil GDP growth in Q1 2023 is estimated to have moderated to 3.1 per cent Y-o-Y, in line with the Opec+ agreements, the apex bank said. “For 2023, growth has been revised down by 0.6 percentage points to 3.3 per cent, reflecting oil production cuts agreed among Opec+ members. The non-oil sector is expected to continue to support aggregate output, albeit at a more modest pace compared to 2022.”

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.

He said 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 4.0 per cent per annum. "Relying more on renewable energy domestically and improving the energy efficiency will free up more hydrocarbons for the export market, which will translate into positive effects for the UAE’s fiscal balance and its balance of payment,” he said.