Sharjah will see a steady GDP growth over the next three years, driven by a strong private sector activity, according to S&P Global Ratings.
“Strong private-sector activity will support economic growth averaging 2.8 per cent in Sharjah during 2024 to 2027,” the rating agency said, adding that the emirate saw real GDP growth of 4.6 per cent in 2023.
Manufacturing, construction, transport, and trade sectors will be lead growth drivers between 2024 and 2027.
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The agency projected growth in 2024, 2025, 2026 and 2027 at 2.5 per cent, 2.7 per cent, 3.0 per cent and 3.0 per cent, respectively.
In the coming years, the growth will be supported by activity in the manufacturing, construction, transport, and trade sectors. In addition, continued demand for real estate in the emirate will support its macroeconomic growth.
“We note that Sharjah’s economy is relatively diverse and not directly reliant on hydrocarbon exports. Sharjah’s GDP per capita remains moderate in a global context and we forecast it will strengthen to about $22,000 in 2024 from $19,000 in 2020,” said S&P analysts.
According to the 2022 census, the emirate’s population reached 1.8 million that year, an increase of nearly 30 per cent increase from the 1.4 million recorded in the 2015 census.
Population between the two censuses could ultimately boost the economy’s productive capacity. In line with stronger economic activity, S&P projected Sharjah’s GDP per capita income will reach $25,000 by 2027.
Revenue growth moderating
S&P analysts expect a modest narrowing of the government deficit to 5.7 per cent in 2024 as expenditure decreases, thereby more than offsetting an expected slight weakening in revenue as a share of GDP.
S&P analysts noted, “the budgeted drop in capital expenditure will also likely partly offset the increase in debt-service costs due to currently high interest rates. Following a 30 per cent increase in 2023, we expect revenue growth to moderate this year.”
The ratings agency expects revenue-raising measures to help Sharjah’s fiscal consolidation efforts such as new fees on real estate transactions for foreign buyers; freehold ownership to all nationalities should increase market activity; new fees on waste collection and volume-based sewerage tariffs to be introduced this year; expansion of car license plate auctions will bring in additional revenue of about Dh1.2 billion; higher UAE-wide VAT and dividend-like budgetary contributions from Sharjah’s GREs; and 9 per cent corporate tax on business profits above Dh375,000 from June 1, 2023.
In 2023, Sharjah’s fiscal deficit was slightly higher than targeted Dh8.7 billion (which is 6 per cent of GDP), compared to Dh8.4 billion. This is due to higher capital spending, debt-service costs, and expenditure in various departments such as police, sports, and social services. This was largely offset by an 11 per cent increase in revenue compared with the target, supported by windfall land sales, higher revenue collection from the economic development and police departments, and higher-than-expected transfers from government-related entities (GREs), the global rating agency said.