The UAE will remain the Gulf’s star economy this year and the next with strong growth despite a slower start at the beginning of 2024.
“The UAE’s economy has been the strongest performer in the Gulf over the past year or so and a robust non-oil sector should help the UAE retain its crown as the fastest-growing economy in the region,” said James Swanston, economist for Mena region at Capital Economics.
Recently-released first-quarter 2024 GDP data from Abu Dhabi and Dubai showed a slightly softer start to the year. Abu Dhabi’s economic growth slowed from 4.1 per cent year-on-year in Q4 2023 to 3.3 per cent year-on-year in Q1 of this year.
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For Abu Dhabi, the first-quarter data showed that growth in both the oil and non-oil sectors slowed. In Q2, oil production volumes appear to have been broadly flat compared to Q1 and, in year-on-year terms, growth picked up from -4.2 per cent year-on-year in Q1 to -1.0 per cent. This would mark the fastest pace of oil output growth since Q1 2023, said Capital Economics.
On the other hand, Dubai’s edged down to 3.2 per cent. “Given that these are the two largest Emirates, it would be fair to say that growth slowed at the national level too,” said Swanston.
“We expect that the UAE’s economy will grow by 3.3 per cent this year as activity in the private non-oil economy softens a touch and oil output remains constrained. However, that would still make the UAE the fastest-growing economy in the Gulf. As oil output rises next year, we expect that GDP growth will accelerate to an above-consensus 5.5 per cent in 2025 – again meaning that the UAE retains its crown as the fastest-growing economy in the region,” he added.
The Central Bank of UAE earlier this year projected strong growth of 4.2 per cent for 2024 and an even higher growth rate of 5.2 per cent for next year, mainly driven by non-oil GDP. Similarly, the IMF also projected about 4 per cent GDP growth in 2024 in May, revising up from the 3.5 per cent forecast it released in April.
GDP growth in GCC countries (%)
| Country | 2024 | 2025 |
| UAE | 3.3 | 5.5 |
| Saudi Arabia | 2.8 | 4.5 |
| Qatar | 1.0 | 2.3 |
| Kuwait | -1.3 | 4.3 |
| Oman | 2.5 | 5.5 |
| Bahrain | 1.5 | 4.0 |
Source: Capital Economics
At the last meeting of Opec+ oil producers, the group agreed to leave oil output virtually unchanged until October and to unwind voluntary output cuts thereafter.
“The UAE negotiated a favourable increase to its base production quota to take effect in January 2025. The recent fall in oil prices raises the risk that planned output rises are delayed. But the oil sector will provide a fillip to the UAE’s economy and result in a sharp acceleration in oil GDP growth at some point over the coming quarters,” said Swanston.
Capital Economics said in another note that growth in the Gulf economies is likely to pick up in the coming quarters, particularly as oil output starts to rise from October. “The outlook will become more challenging from 2025 as oil prices fall back and it becomes more difficult to sustain loose fiscal policy. Outside of the Gulf, macro imbalances are easing. But this remains contingent on governments continuing reforms and keeping policy tight, which will weigh on the pace of recoveries,” it said.