High oil prices stimulate Dubai economy

The technology sector still aligns with the digital economy strategy


Somshankar Bandyopadhyay

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Published: Sun 26 May 2024, 5:25 PM

Last updated: Sun 26 May 2024, 5:26 PM

The positive trend of crude oil so far has further stimulated Dubai’s economy, with the transportation sector leading the charge, research shows.

In fact, transportation costs increased by 3.3 per cent on a monthly basis in April, adding to inflationary expectations in the coming months.

According to the CME Group Opec Watch Tool, there is a 57.5 per cent probability that the policy will remain unchanged. From the UAE’s perspective, maintaining elevated production levels and stabilising oil prices at lower levels would bolster economic growth and help mitigate inflationary pressures for the remainder of 2024.

“While the growth outlook may not be on an upward trajectory for the second quarter, annual growth prospects remain promising, driven by the UAE’s robust economic diversification efforts,” says Razan Hilal, market analyst at Forex.com.

As economies navigate the interplay between global policies and inflation rates, the slightest data supporting rate cuts is fostering euphoric sentiment across the markets. Inflation rates are gradually decreasing towards their targets, leading central banks to cautiously assess their suitable rate cut dates towards the year-end.

Unlike the United States of America, Dubai’s inflation rates ticked higher in April 2024, rising from 3.3 per cent to 3.9 per cent. Despite this increase, the UAE’s economic growth forecasts show resiliency for the remaining quarters of 2024, with a 3.9 per cent real GDP expectation according to the World Bank.

Razan Hilal, market analyst at Forex.com
Razan Hilal, market analyst at Forex.com

The UAE MSCI Index and the Dubai Financial Market have followed a sideways to bearish track, trading near their yearly lows. Nonetheless, from a fundamental perspective, the housing sector is progressing in line with the Dubai Urban Master Plan 2040.

The technology sector still aligns with the digital economy strategy, aiming to double its contribution to GDP by 2032. The tourism and infrastructure sectors are advancing according to the UAE’s National Tourism Strategy 2031, while initiatives to enhance Foreign Direct Investment seem to progress in line with the UAE’s Green Agenda 2030.

“Sustainable visions are central to the UAE’s long-term economic growth forecasts”, says Hilal, adding: “In the short term, all eyes are on Opec policies, which are poised to define the oil supply landscape. The upcoming supply decisions will be crucial in determining the trajectory for oil prices in the next quarters.”

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