Abu Dhabi GDP expected to expand at 2.5% this year

Abu Dhabi’s economy is expected to grow at 2.5 per cent this year, and an average of 3.5 per cent over 2026 to 2028, underpinned by non-hydrocarbon activity rising three per cent a year, a report showed on Tuesday.

S&P Global Ratings on Tuesday announced the emirate’s sovereign credit rating for both foreign and local currency at AA/Stable/A-1+. The ratings agency also expects that regional tensions will, on balance, have a limited effect on Abu Dhabi, amid continued domestic stability.

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Real economic growth accelerated to 3.8 per cent in 2024 from 2.4 per cent in 2023, supported by a 6.2 per cent expansion of the non-hydrocarbon sector. The finance and insurance, construction, manufacturing, and wholesale and retail trade sectors were the strongest contributors to that growth, reinforcing Abu Dhabi’s economic diversification efforts. The non-oil economy contributed 54.7 per cent of total GDP, its highest share ever. 

As the hydrocarbon sector contributes significantly to Abu Dhabi’s economy, S&P projects that the gradual lifting of OPEC+ quotas will support medium-term oil production. After steadying at 2.95 million barrels per day (bpd) over 2023-2024, oil production is expected to rise to 3.04 million bpd in 2025 and reach 3.50 million bpd by 2028. “Given existing oil production capacity of up to 4.85 million bpd and new gas projects coming onstream, there is an upside to our projections that would benefit economic growth as well as fiscal and external surpluses,” the ratings agency said.

The 70 per cent-75 per cent of revenue coming from the sector includes oil taxes and royalties, plus dividends from ADNOC. “To act as a buffer against oil price fluctuations, the government has accumulated one of the largest net asset positions of all sovereigns we rate, estimated at 327 per cent in 2025,” the agency said.

The exceptional strength of the government’s balance sheet provides a buffer to counteract fiscal and external shocks. “We expect the government will run fiscal surpluses over our forecast horizon to 2028, assuming Brent oil prices of $65 per barrel in 2025 and $70 per barrel beyond then,” S&P analysts wrote.

Abu Dhabi recorded a fiscal surplus of 6.7 per cent of GDP in 2024, consistent with 2023 levels. “We expect the surplus will narrow to 2.8 per cent of GDP in 2025 before widening to about 6.0 per cent on average over 2026-2028,” the ratings agency said.

Abu Dhabi’s population is expected to continue increasing about 3 per cent annually to 2028, on new job creation, socioeconomic reforms in the UAE, and large infrastructure projects that will continue to drive migrant inflows. “We expect domestic demand and investment will remain resilient amid strong regional demand,” S&P said.

Somshankar Bandyopadhyay

Somshankar Bandyopadhyay is a News Editor with close to three decades of experience. Currently, he m...Read More

somshankar@khaleejtimes.com