The Central Bank of the United Arab Emirates left its national economic growth forecast unchanged at 4.3% in 2024.
The UAE central bank said in its quarterly economic review that the UAE economy continued to grow steadily in the first quarter of 2023, “reflecting a strong performance in the non-oil sector, partially offset by a slowdown in the oil sector of the economy.” It was revised down by 0.6 percentage point to 3.3%, reflecting the agreement to cut oil production agreed by OPEC+ members. “
The non-oil sector is expected to continue to support total output, albeit at a more modest pace than in 2022, the Wam news agency reported.
Oil GDP: After growing 9.5% in 2022 with an average production of 3.1 million barrels per day, oil GDP growth is expected to slow to 3.1% YoY in 1Q23, in line with the OPEC+ agreement. Starting in May 2023, OPEC decided to cut production in the UAE by 144,000 barrels per day. This has led to a downward revision of the 2023 GDP growth forecast to -0.3%, corresponding to an average production of 2.95 million barrels per day. The CBUAE expects other hydrocarbon products, such as liquefied natural gas (NGL), which, while not covered by the OPEC+ production agreement, contribute to oil GDP, will continue to grow strongly through 2023. Oil GDP growth is expected to rebound to 3.5% in 2024.
“Performance in 2023 and 2024 depends on the evolution of the conflict in Ukraine, a faster-than-expected deceleration in global economic growth, further OPEC+ production cuts or increases in oil production, and lower output from other OPEC+ members,” the review said.
“The non-oil sector is expected to grow at a slightly slower pace in the first quarter of 2023, following a 7.2% increase in 2022. Despite the weak first quarter this year, the CBUAE has revised up its non-oil GDP growth forecast for 2023 to 4.5%, mainly due to the acceleration of private and public investment in the remainder of the year. Travel and tourism is expected to accelerate further, which is in line with the results of some major industry market players. For 2024, CBUAE projects real non-oil GDP growth 4.6%, in line with global growth trends.”
Regarding the investment and consumption of the UAE government in 2022, the report shows that the comprehensive fiscal balance surplus is 195.7 billion dirhams, accounting for 10.5% of GDP, higher than 4.5% in 2021.
“Government revenue rose by 27.0% to AED 596.8 billion in 2022 due to higher tax revenues and social contributions, but this was partially offset by a decline in other revenues. % to reach AED 381.1 billion, compared with an annual growth rate of 9% in 2021. The decline in expenditure is due to goods and services, subsidies, grants and other charges. Capital expenditure, measured by net investment in non-financial assets fell by 8.5% to AED 20 billion. Total spending reached AED 401.7 billion, down 1.4% compared to 2021.”
On private investment and consumption, APEX Bank said the private sector continued to show strong dynamism thanks to several reforms to increase FDI inflows and attract top talent.
“The UAE’s PMI points to 28 consecutive months of expansion in the non-oil private sector, reaching 55.9 in March 2023 and averaging 55.3 in 2022,” the country’s PMI report said.
“Growth in new business was the fastest since October last year, encouraging firms to purchase inputs at the strongest pace in five years. Firms also continued to benefit from relatively modest cost pressures despite narrowing margins. Dubai PMI noted that as Growth momentum is set to pick up by the end of the first quarter of 2023, as businesses expand capacity to support output expansion. This is reflected in strong gains in employment and inventories, which are at multi-year record rates. However, March data also showed Signs of a slowdown in demand growth, with new orders growing at the slowest rate since January 2022. Domestic consumption also performed well in the first quarter of 2023, underpinned by a sharp increase in employment. In the first quarter of 2023, the number of employed people in the UAE The three-month moving average of wages and wages paid by the private sector showed double-digit year-over-year growth, with levels and growth rates higher than pre-pandemic levels.
“The PMI survey also showed a buoyant non-oil private sector labor market in March, with new order growth accelerating and capacity pressures leading to the fastest increase in employment since July 2016. Banking sector continues to support private sector investment Q1 2023 Private Sector Credit grew 5.9% year-on-year,” it added.