UAE’s economy to continue its robust performance in 2023: Opec

The Organisation of the Petroleum Exporting Countries (Opec) forecast that the UAE’s economy will continue its robust performance in 2023, after recording a growth of 7.9 per cent year-on-year in 2022.

According to Opec’s Monthly Oil Market Report for August, this robust performance will be delivered through constant contributions from the non-oil sector, especially from tourism, leisure and real estate.

The report revealed that the country’s Global Purchasing Managers’ Index (PMI) was almost unchanged in July, standing at 56, following 56.9 in June and compared to a level of 55.5 in May. This suggests that the expansionary trend will be maintained.

Meanwhile, the UAE’s real estate market remains on an upward trajectory, the report further showed, with H1’23 seeing a substantial surge in overall property transactions. This played a role in driving up residential property prices in Dubai by 16.9 percent YoY as of June, as reported by REIDIN.

Finally, the Central Bank of the UAE (CBUAE) mirrored the 25 bp increase in interest rates implemented by the US Federal Reserve in July, putting the key-policy rate at 5.4 percent and resulting in a total rise of 525 bp in just over a year. The short-term interest rate is now approaching its highest level since before the global financial crisis.

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.

The domestic economy’s resilience, which has passed through the stage of recovery from the consequences of the Covid-19 pandemic, is reflected in the positive forecasts of international institutions and banks, including the IMF and World Bank.

Such international recognitions speak for the UAE economy’s durability in the face of global geopolitical turmoil and adverse economic conditions, therefore verifying the success of the UAE leadership’s forward-looking vision.

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

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

For its part, the World Bank has projected that the real GDP of the UAE will grow by 2.8 per cent in 2023, as the non-oil sector is expected to achieve strong growth of 4.8 percent, driven by robust domestic demand, particularly in tourism, real estate, construction, transportation, and manufacturing sectors.

In a press conference held recently 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.

These international testimonies are consistent with the forecasts of the Central Bank of the UAE in its quarterly economic review, wherein the apex bank said that the UAE economy continued to grow at a solid pace in Q1 2023, “reflecting a strong performance of the non-oil sector, partially offset by a moderation in the oil segment of the economy. For 2023, growth has been revised down by 0.6 percentage points to 3.3%, reflecting oil production cuts agreed 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.