The non-oil sector will drive growth of the UAE and the GCC region in 2024 as crude demand is expected to stay subdued due to low demand, say economists.
Khatija Haque, chief economist and head of research at Emirates NBD, said non-oil sector growth came in at 5.9 per cent for the whole UAE in first-half of 2023, driven by the growth of 9.2 per cent in Abu Dhabi’s non-oil sectors compared with Dubai’s 3.2 per cent first-half growth. Preliminary data for Q3 showed that non-oil growth in Abu Dhabi slowed only slightly to 7.7 per cent.
“In 2024, we expect non-oil growth to slow only slightly to 4.5 per cent on the back of slower global growth. Continued structural reform to improve the business environment and attract investment is expected to underpin aggregate demand, albeit at a slower pace than in 2023,” she said.
Haque sees global growth slowing slightly to 2.9 per cent in 2024 from 3.0 per cent in 2023 as tight monetary policy continues to weigh on demand and investment, particularly in the first half of the year.
“This scenario is consistent with softer demand for oil, particularly in the advanced economies, and oil GDP growth in the GCC will remain a drag on headline GDP growth in 2024. We expect oil prices to average $82.5 a barrel this year, similar to 2023,” said Haque.
On Wednesday, World Bank also projected slower growth for the third year in a row in 2024 from 2.6 per cent last year to 2.4 per cent as mounting geopolitical tensions could create fresh near-term hazards for the economy.
“However, we think non-oil growth will remain relatively robust, averaging 3.6 per cent across the GCC in 2024, underpinned by continued investment as oil exporting countries push ahead with ambitious economic diversification programmes,” Haque said in a note.
She sees government expenditure growth will likely be more modest in 2024 than over the last couple of years. “We do not expect governments to cut spending or tighten fiscal policy through higher taxes,” she added.
Among the non-oil sectors, travel and tourism, real estate, aviation and trade have seen exponential growth in the post-pandemic period as economies bounced back after massively shrinking in 2020.