UAE's economic growth forecast revised as non-oil sectors drive expansion

The Central Bank of the UAE wrote that it raised its 2024 GDP growth forecast to 4 percent, up from 3.9 percent, reflecting the stronger-than-expected performance of the oil sector.

For 2025, growth is projected to reach 6 percent, driven by momentum in the non-hydrocarbon sectors and a significant increase in hydrocarbon production.

The Quarterly Economic Review issued by the apex bank highlighted that key sectors such as tourism, transportation, financial services, construction, real estate, and communications are propelling this growth. However, oil production levels in 2024 are moderating overall GDP growth.

Non-oil GDP is expected to remain strong, growing by 5.2 percent in 2024 and 5.3 percent in 2025, supported by government initiatives like strategic foreign investment policies, structural reforms such as 100 percent foreign ownership, and tax reforms.

The hydrocarbon sector is forecast to grow modestly by 0.7 percent in 2024 but will see a significant jump of 7.7 percent in 2025.

In Q1 2024, the UAE’s fiscal balance was positive, with a surplus of AED 23.5 billion ($6.4 billion), representing 4.9 percent of GDP.

Government revenues increased by 4.3 percent year-on-year, reaching AED 120.6 billion ($32.8 billion), thanks to a 32.5 percent rise in tax revenues, largely due to the introduction of corporate tax.

The share of tax revenues in total income jumped from 45.8 percent in Q1 2022 to nearly 70 percent in Q1 2024.

Government spending reached AED 97.1 billion ($26.4 billion), or 20 percent of GDP, with major spending categories such as employee compensation (up 6.3 percent), goods and services (up 15.2 percent), and social benefits (up 3.4 percent).

Capital expenditure rose dramatically, growing sevenfold to AED 5.6 billion ($1.5 billion).

Employment data remained stable, with a 4.8 percent year-on-year increase in average wages in June 2024, indicating strong domestic consumption and sustainable economic growth.

Meanwhile, the 16 non-oil sectors continued to expand in Q2 2024, though at a slower pace. Key sectors such as wholesale trade, manufacturing, and construction continued to grow, driven by the UAE’s Comprehensive Economic Partnership Agreements (CEPA) and visa reforms, which increased trade volumes and transactions.

The manufacturing sector, supported by foreign direct investment, expanded in line with the country’s “Operation 300 billion” strategy. Construction activity also increased, with major infrastructure projects like Etihad Rail and Dubai Creek Harbor contributing to growth.