UAE Central Bank Upgrades 2024 GDP Growth Forecast to 4 Percent

The United Arab Emirates (UAE) has recently made headlines with its central bank's updated forecast for the country's GDP growth in 2024. Initially, the bank projected a growth rate of 3.9 percent, but it has now raised this estimate to 4 percent. This adjustment comes as a result of anticipated improvements in the oil sector, which plays a significant role in the UAE's economy.

According to the central bank's second-quarter economic report, the non-hydrocarbon sector is expected to grow by 5.2 percent in 2024, with a slight increase to 5.3 percent in 2025. Meanwhile, the hydrocarbon sector, which includes oil and gas production, is projected to see modest growth of 0.7 percent this year, but a significant jump to 7.7 percent in 2025. The report highlights that various sectors, including tourism, transportation, financial services, construction, and real estate, are driving this growth. However, it also notes that current oil production levels may temper overall growth.

The central bank is optimistic about the hydrocarbon sector's momentum in 2025, anticipating substantial production increases. Additionally, a rapid decline in interest rates in major advanced economies could enhance global demand and attract capital flows into emerging markets like the UAE.

In the first quarter of 2024, non-hydrocarbon GDP growth was recorded at 4 percent year-on-year, a decrease from 6.7 percent in the previous quarter. This slowdown is primarily attributed to declines in financial services, real estate, construction, and manufacturing. Nevertheless, the report reassures that non-hydrocarbon GDP growth is expected to remain robust, driven by government strategies aimed at attracting foreign investments and ongoing structural reforms.

The fiscal balance for the first quarter of 2024 was positive, standing at 23.5 billion Emirati dirhams (approximately $6.39 billion), which is 4.9 percent of GDP. This is a slight increase from 23.2 billion dirhams, or 5.1 percent of GDP, in the same quarter of 2023. The UAE's consolidated budget revenues also saw a year-on-year growth of 4.3 percent, reaching 120.6 billion dirhams, largely due to a 32.5 percent increase in tax revenues.

Tax revenues have become a more significant part of the UAE's total revenues, rising from 45.8 percent in the first quarter of 2022 to 70 percent in the first quarter of 2024, thanks to the recent introduction of corporate taxes. Government spending in the first quarter of 2024 totaled 97.1 billion dirhams, reflecting a 5 percent year-on-year increase. Key spending categories, such as employee compensation and social benefits, have also seen notable increases.

Furthermore, the Central Bank of the UAE has observed signs of growth in the private non-oil sector, with the purchasing managers' index reaching 53.7 in July, indicating sustained business confidence. Employment data shows stability in the number of workers covered by the Wage Protection System, with average monthly wages increasing by 4.8 percent.

The UAE's economic outlook for 2024 appears promising, with growth driven by both hydrocarbon and non-hydrocarbon sectors. The government's strategic initiatives and reforms are expected to continue attracting foreign investments, which will further bolster the economy. As the UAE navigates through these changes, it remains crucial for stakeholders to stay informed and adapt to the evolving economic landscape.