The Central Bank of the UAE 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 CBUAE 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 the fourth quarter of 2023, the UAE economy expanded 4.3 per cent YoY, above the 2.5 percent growth registered in Q3 2023. The quarterly increase is due to both, non-hydrocarbon growth accelerating (which accounts for around 75 per cent of GDP and better performance of the hydrocarbon sector.
The country’s non-oil trade reached a record high of Dh3.5 trillion in 2023, reflecting the country’s initiatives to reduce its reliance on oil. Trade in non-oil goods rose 12.6 per cent from 2022, while exports of goods and services surpassed Dh1 trillion to set a new record. The Comprehensive Economic Partnership Agreements (Cepas) that the UAE has signed with several countries will play a major role in boosting foreign trade numbers moving forward.
The International Monetary Fund (IMF) has projected higher growth for the UAE economy for next year than in 2023 and 2024, the highest in three years.
The World Economic Outlook released by IMF predicted 4.2 per cent GDP growth for 2025 as compared to 3.5 per cent for 2024 and 3.4 per cent for last year. In 2022, the UAE economy grew 7.9 per cent, bouncing back after also has raised its forecast for the UAE’s real GDP growth to 3.9 per cent in 2024, compared to its previous forecast in January of 3.7 per cent.
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
CBUAE’s latest data shows that the consolidated fiscal balance in 2023 remained positive at Dh85.6 billion, equivalent to 4.5 per cent of GDP, with total revenue declining by 13.9 per cent to Dh526.1 billion (27.9 per cent of GDP). Government expenditure increased by 3.1 per cent to Dh440.5 billion (23.3 percent of GDP), the report further added, noting that the fiscal sector remains sustainable and will be further strengthened as a result of the recently introduced corporate income tax.
“Indicators point towards robust economic activity within the non-oil private sectors,” the CBUAE said. As of April 2024, the UAE’s Purchasing Managers’ Index (PMI) was reported at 55.3, driven by continued business optimism on economic prospects. Such positive sentiment is driven by the expectation of ongoing robust demand and sales, supporting consistent output growth.
Dubai recorded a PMI of 55.1 in April 2024, reflecting persistent growth in the emirate’s non-oil private sector.
The downward revision of inflation is due to lower-than-expected increases in commodity costs, incomes, and rents, the apex bank said.
“Commodity prices, wages, and rents are expected to increase at a lower rate than previously expected with the dirham appreciation, due to the USD appreciation,” the central bank said.
Next year, inflation is forecast to average 2.3 per cent, mainly driven by the non-tradeable component of the consumer basket.