UAE's growth prospects brighten amid weak global outlook

The UAE’s GDP is expected to expand by over five per cent in 2024, surpassing the 2.8 per cent growth expected for the global economy, economists and analysts forecast.

While the global economy remained subdued operating at subpar growth levels, economists at Standard & Poor's (S&P) Global Ratings estimate that UAE GDP expanded at over three per cent in 2023, including close to six per cent growth for the non-oil sector.

The World Economic Forum’s latest survey of chief economists finds that the global economic outlook is “fraught with uncertainty,” with some 56 per cent of them saying that they expect the global economy to weaken in 2024. About 87 per cent of respondents in the WEF survey expect recent geopolitical developments to stoke global economic volatility in the next three years, and eight out of ten expect it to heighten volatility in stock markets.

“Amid accelerating divergence, the resilience of the global economy will continue to be tested in the year ahead,” WEF managing director Saadia Zahidi said in the forum's latest Chief Economists Outlook report.

The International Monetary Fund expects the global economic growth to fall slightly in 2024 to 2.9 per cent, from three per cent last year.

Tatiana Leskova, Associate Director of Corporate Ratings at S&P Global Ratings, said in a note that the rating agency expects continued strong momentum in Dubai’s hospitality, wholesale and retail, and financial services sectors to drive growth in 2024-2025.

According to the World Bank’s Global Economic Prospects report, the UAE’s real gross domestic product (GDP) is expected to grow by 3.7 per cent in 2024, up from 3.4 per cent last year. The GDP is forecast to rise to 3.8 per cent in 2025.

FocusEconomics Consensus Forecast said the UAE is set to boost its economic growth in 2024 propelled by a bigger Opec+ quota from the second quarter and a turbocharged non-oil business activity.

The UAE’s oil output will be stronger in 2024 than in 2023 as the country negotiated a higher Opec+ quota from the second quarter 2024, according to the forecast.

The UAE’s GDP growth was the fastest in over 10 years in 2022, but then appeared to weaken in 2023. In the first 11 months of 2023, the UAE as a whole pumped 3.6 per cent less crude oil than it did in the same period in 2022, after agreeing with Opec+ earlier in 2023 to curb output. “More positively, non-oil business activity was the strongest in four years in October and remained rapid in November and December,” economists at FocusEconomics said.

Meanwhile, the growth in the GCC countries will rise to 3.6 per cent in 2024 and 3.8 per cent in 2025, supported by rebounding oil activity.

“So far, the UAE and Dubai more specifically have remained relatively immune to the global economic headwinds, thanks to the limited sensitivity to interest rates and contained inflation. Despite higher interest rates, the number of mortgage transactions continued to grow in Dubai, where over 80 per cent of real estate transactions are completed on a cash basis. In contrast, the European real estate market has been marked by weakened purchasing power since 2022 due to high interest rates and relatively higher inflation. The China market also remains challenging for its leveraged developers, with margins tightening as prices drop, pressuring profitability. The picture has become a little brighter in the US, where demand picked up at the start of 2023 after a slowdown,” said Leskova.

The profile of buyers evolved slightly from 2022, with a sharp increase in Russian buyers becoming one of the largest investor groups in Dubai. “We expect this to be temporary, with Indians, Europeans and GCC buyers remaining the largest investors as per the historic trend. Dubai still remains far more attractive as an investment opportunity than other emirates despite news of gaming hotels in RAK, and general economic growth in the country overall,” said Leskova.

While there are positive developments, such as easing inflationary pressures and advances in the field of artificial intelligence (AI), businesses and policy-makers face persistent headwinds and continued volatility as global economic activity remains slow, financial conditions remain tight and geopolitical rifts and social strains continue to grow, WEF economists said.

The survey of 30 chief economists between November and December last year found that 56 per cent of those questioned expect the global economy to weaken in 2024, while 20 per cent expect it to remain unchanged and 23 per cent forecast “somewhat stronger” economic conditions.

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