UAE economy primed for stronger growth in H2 2023

The World Bank has forecasted a 2.8 per cent growth in the UAE’s real GDP for this year

by Gulf Business

July 2, 2023

Image credit: Unsplash

Despite the geopolitical ramifications that the global economy is currently facing, the UAE economy is poised for stronger growth, recovery, and prosperity in the second half of this year, supported by a track record of economic successes that have fructified into the UAE’s designation as an innovation-driven economy, reported state news agency, WAM.

The UAE economy’s strength and recovery from the aftermath of the Covid-19 pandemic are evident in the positive projections made by international institutions and banks including the International Monetary Fund (IMF) and World Bank.

“The UAE is poised for positive economic growth as it is projected to achieve a 3.6 per cent increase in its gross domestic product this year, driven by robust domestic activity,” said the IMF, recently.

Following a growth rate of 7.9 per cent in 2022, the UAE’s economy is expected to maintain its upward trajectory in 2023, benefitting from sustained tourism activity and higher capital expenditure, the IMF said in its 2022 Article IV assessment.

Similarly, the World Bank has forecasted a 2.8 per cent growth in the UAE’s real GDP for 2023.

The non-oil sector is expected to experience robust expansion of 4.8 per cent, primarily driven by strong domestic demand in key sectors such as tourism, real estate, construction, transportation and manufacturing.

In a press conference held in Dubai recently to announce the new World Bank Gulf Economic Update (GEU) titled, “The Health and Economic Burden of Non-Communicable Diseases in the GCC“, the bank officials said that the current account balance in the UAE is expected to rise to 11.7 per cent in 2023, as well.

The report expected the UAE to achieve a surplus in public finances of 6.2 per cent in 2023.

The assessments from international institutions align with the projections provided by the Central Bank of the UAE in its quarterly economic review.

According to the apex bank, the UAE economy maintained a robust growth trajectory in Q1 2023, primarily driven by a strong performance in the non-oil sector, although the oil segment experienced a slight moderation.

The Central Bank revised the growth forecast for 2023 downward by 0.6 percentage points to 3.3 per cent, considering the agreed-upon oil production cuts among OPEC+ members.

The non-oil sector is expected to continue to support aggregate output, albeit at a more modest pace compared to 2022.”

The UAE economy is expected to grow further this year for a variety of reasons, including a rise in the purchasing managers’ index to its highest level in five months, namely May this year.

The seasonally adjusted S&P Global UAE Purchasing Managers’ Index – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – posted 55.5 in May, indicating a robust improvement in the sector’s performance.

Despite dropping from 56.6 in April to a three-month low, the index remained above the 50.0 no-change mark and its long-run average.

According to the S&P Global, the strong rise in new business underlined growing confidence across surveyed firms about economic prospects. Expectations towards activity over the next year improved for the fifth consecutive month in May to the highest level since late-2021.

The UAE’s progress in implementing comprehensive economic partnership agreements will help to improve trade and integration into global value chains, as well as attract more foreign direct investment, boosting national economic growth.

Such partnerships are significant drivers for economic growth that create trade and investment opportunities and contributes to the vitality of regional and global trade and investment flows.