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Tuesday, May 30, 2023

UAE’s 2022 rally may wane this year as oil prices lower

With lower oil prices, the UAE’s rebound in 2022 may fade in 2023, but growth will still be slightly above the long-term average.

Deutsche Bank research said that low fiscal and external surpluses are expected to be maintained this year, but the continued tightening of monetary policy by the UAE Central Bank will continue to anchor inflation expectations and curb the second-round effect.

The German bank said it expects inflation to moderate slightly in 2023, with its current forecast at 3.4% this year, down from 4.9% in 2022.

Meanwhile, real growth is expected to slow to 3.8% in 2023, compared with an estimated 7.6% in 2022, but will still be above the long-term average of 3.2%.

In the medium term, economic activity in the UAE will continue to be strong, supported by investment and upcoming mega-projects aimed at diversifying the country, but growth is expected to slow, mainly due to oil prices, the bank said. Environmental support is weakened.

The ongoing energy crisis in Europe presents an opportunity for the UAE to strengthen cooperation on key issues such as energy security, the bank said. a little.

“Slowing global growth, geopolitical instability and policy missteps are some of the key risks. While short- to medium-term risks are balanced, ensuring the sustainability and resilience of the UAE’s economic model depends largely on successful diversification.

“Therefore, avoiding a fiscal downturn and ensuring credible and sustained commitment to targeted reforms will be key to unlocking the full potential of the economy and maintaining a competitive advantage,” the bank added.

(Writing by Imogen Lillywhite; Editing by Seban Scaria)


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