BMI Research, a subsidiary of Fitch Solutions, expected that the real GDP growth of the United Arab Emirates will accelerate from 3.3% in 2023 to 4% in 2024, driven by the recovery of the oil sector. It also expected that growth in Abu Dhabi would recover from 3% in 2023 to 3.8% in 2024, while Dubai’s growth would accelerate from 3.6% in 2023 to 3.9% in 2024. These expectations came during a meeting it held under the title: “The United Arab Emirates in 2024 and beyond.” After him” at the “Capital Club Dubai” in the Dubai Financial Center.
Ramona Mubarak, Head of Risk Management for the Middle East at Fitch Solutions, expected real non-oil GDP growth in the UAE by 5% in 2024, in Saudi Arabia by 4.6%, in Oman by 3%, and in Kuwait by 1.8%.
Mubarak said: “Despite the rise in transportation costs, we expect average inflation to decline from 3% in 2023 to 2.1% in 2024 due to a decline in rent growth and food prices.”
She stressed that “non-oil activity will remain strong, despite its decline starting in 2023, supported by increased investment and strong household spending.”
She explained, “The acceleration of growth is mainly due to the recovery of the oil sector. In fact, we expect the sector to grow by about 1% in 2024, after contracting by 3.2% in 2023. The gradual cancellation of some supply restrictions imposed by “OPEC +” in the second half of 2024, along with a 3.4% increase in Brent prices, according to “This will drive expansion in the sector this year and boost hydrocarbon exports,” our oil and gas team expects.
- Growth at 4% in 2024… and inflation declining to 2.1%
- Continuing surpluses allow for the accumulation of additional foreign assets and the repayment of debt
It expected that “public finance and current account surpluses will shrink in 2024 despite the recovery in oil and gas revenues, as progress in diversification efforts will lead to enhanced spending and imports.”
It expected that “the UAE’s fiscal surplus will shrink slightly from 5.6% of GDP in 2023 to 5.4% of GDP in 2024. We have marginally revised our expectations from surpluses of 6% of GDP in 2023 and 5.6% of GDP in 2024 is based on fiscal performance for the first nine months of 2023, indicating weaker revenues and higher capital spending than we expected. “Our forecast is slightly higher than the Focus Economics consensus, which expects the surplus to reach 5% of GDP in 2024.”
The agency noted that “the UAE’s continued surpluses will allow it to accumulate additional foreign assets and pay off its debts,” expecting that “the debt ratio will gradually slow down in the medium term.”
- Economic diversification
She stressed that “the UAE is the most successful among the Gulf markets when it comes to diversifying its economy, which represented just over a quarter of the real GDP in 2019 (at 2010 prices).”
She continued: “Progress in economic diversification plans, especially in Abu Dhabi and Dubai, will be the main driver of growth in the non-oil sector. This will mostly be reflected in stronger investment activity and expanded non-oil trade. In fact, we expect the authorities to maintain the reform momentum to attract additional foreign investment in priority sectors, such as trade, transportation, warehousing, financial and manufacturing sectors. Public and private investments will also benefit from higher oil revenues and lower borrowing costs in the second half of 2024. This will have an indirect impact on the construction sector, which will remain a major driver of non-oil activity in 2024, supported by a wide range of construction and infrastructure projects.”
- Economic partnership agreements
She considered that “the signing of several Comprehensive Economic Partnership Agreements (CEPA) in 2023 and now in 2024 will support stronger growth in exports of non-oil goods and services. Preliminary data show a growth in non-oil exports by 16.7%. In 2023, re-exports increased by about 7% over 2022, which is stronger than we expected. For example, the implementation of the Economic Partnership and Comprehensive Partnership Agreement with Turkey increased trade between the two markets by 103.7%. Services exports also recorded strong growth, resulting in the services surplus expanding by 124.4% compared to 2021. Meanwhile, the weighted average growth of the UAE’s six largest trading partners indicates that the demand for the UAE’s exports, in net value terms, will remain unchanged. Widely. “We have slightly increased our forecast for exports of goods and services.”
- Contribution of net exports to domestic product
It expected that “the contribution of net exports to real GDP in the long term will remain positive, adding 1.8 percentage points on average to real GDP growth between 2024 and 2033.” This will mostly be due to the new $150 billion investment plan launched by the UAE’s state-owned oil company, Abu Dhabi National Oil Company (ADNOC), during the period 2023-2027. The plan aims to increase oil production and make Abu Dhabi a net exporter of gas, which will boost hydrocarbon exports. Steady growth in the tourism and financial services sectors would add tailwinds to export growth, and the contribution of net exports to real GDP growth would be less than the 2010-2019 average of 2.4 percentage points. This will be mostly due to slower growth in oil and gas production and continued demand for imports, especially as large infrastructure projects will lead to increased demand for capital imports, while a rising population will keep demand for consumer goods high.”
- Current account surplus
The agency noted in its report: “While we expect the UAE’s current account surplus to shrink from 11.2% of GDP in 2023 to 10.7% of GDP in 2024, it will remain large compared to the historical trend. We have revised our 2024 forecast slightly from 10.4% of GDP, as we are somewhat more optimistic on non-oil trade and re-exports. This will be the country’s fourth consecutive double-digit surplus. “We are a little more optimistic than the consensus, which expects a surplus of 9.7% of GDP in 2024.”
The agency noted, “We have an optimistic outlook for the United Arab Emirates over the next ten years,” noting that “the Covid-19 shock and the accompanying collapse in global oil prices have encouraged the authorities to accelerate their reform campaign to improve the business environment, diversify the economy, and maintain a high population.” . These measures will support the UAE’s long-term growth and make it the economy with the fastest average growth rate over the next ten years in the Gulf Cooperation Council countries.”
Regarding the risks that could threaten economic growth in the UAE and the Gulf Cooperation Council countries, she indicated that “OPEC+ measures may be insufficient to support oil prices.” This will greatly impact the non-oil economies in the Middle East and North Africa region, and may hinder the momentum of diversification efforts,” she noted, noting that “a weaker global economy would encourage OPEC+ to extend supply cuts or impose new restrictions to raise prices.” Admittedly, additional cuts in oil supplies are less likely than prolonged cuts, but could lead to a more severe economic slowdown.
She stressed that “high inflation could delay the start of the monetary policy easing cycle in the United States.” This could keep interest rates in the GCC countries high for a longer period amid weak inflation, leading to higher real interest rates and burdening the non-oil economy.”
She considered that “also a highly indicated risk is the prolongation of the war between Israel and the Palestinians until the second half of 2024 without expanding to other countries, which will affect growth in Israel, the Palestinian territories, and Lebanon.” The longer war will also see Houthi attacks on ships in the Red Sea continuing for longer than we currently expect, with Egypt, Israel and Jordan being the most affected.
She pointed out that “in the event of a large-scale military confrontation between Lebanon and Israel, or the Houthis in Yemen and the international coalition, then we could also witness an intensification of clashes in the West Bank.” The economies of the Arab Levant will witness economic contractions, while tourism, investment and exports in Egypt will be affected, putting the economic recovery at risk.”
- Expansion of Al Maktoum Airport…a huge and very important project
In response to Al Khaleej’s question about the impact of the expansion of Al Maktoum Airport on Dubai’s economy, Ramona Mubarak, Head of Risk Management for the Middle East at Fitch Solutions, indicated that “the expansion of the airport is a huge and very important project, and will give Dubai the ability to expand the transportation and warehousing sector, which… “We are focusing on it and making it a major destination for tourism and transit,” stressing that “the airport expansion is a positive development and supports the construction sector in Dubai.”