UAE Central Bank raises 2024 growth forecast for country’s economy to 5.7%

The UAE Central Bank has increased its 2024 growth forecast for the country’s economy to 5.7 per cent, from 4.3 per cent previously, due to an expected rise in oil production next year.

The banking regulator also revised downwards its growth projections for 2023 to 3.1 per cent from 3.3 per cent, “largely reflecting the extension of oil production cuts through the end of the year”, it said in its Quarterly Economic Review report.

While the country’s oil gross domestic product is expected to contract by 3.4 per cent annually this year due to output cuts, “as production resumes in 2024” oil GDP growth is forecast to rebound to 8.1 per cent, corresponding to an average of 3.2 million barrels per day, the Central Bank said.

In its latest meeting, the Opec+ group of oil producers announced voluntary production cuts of 2.2 million barrels per day for the first quarter of 2024.

The UAE will voluntarily cut its oil output by an additional 163,000 barrels a day from January until the end of March next year. The country’s oil production will be 2.91 million bpd during that period.

Meanwhile, the UAE’s non-oil GDP growth has been raised to 5.9 per cent and 4.7 per cent, in 2023 and 2024, respectively, the Central Bank said.

“In addition to the changes in oil production reflecting the recent announcements, the forecasts account for a deceleration in the non-oil sector for 2023 and 2024 as global demand softens,” the report said.

Overall, in the second quarter of the year, the UAE’s economy grew by 3.8 per cent year on year, compared with an 8 per cent annual rise in the same period last year.

“While the overall growth rate slightly increased with respect to the first quarter of 2023, there was a compositional shift with stronger activity in the non-oil sector [which accounts for close to 75 per cent of GDP] and a decline in oil production,” the report said.

Non-oil economic growth accelerated to 7.3 per cent annually in the second quarter.

“Across the different segments of the non-oil economy, a large expansion is registered for financial and insurance services, construction, real estate, wholesale and retail,” the report said.

Oil sector GDP growth dropped in the second quarter of 2023 by 5.1 per cent annually, reflecting the “Opec+ agreements, for which the UAE oil production fell to an average of 2.9 million barrels per day during the quarter”.