Despite a slower start in early 2024, the UAE is set to remain the Gulf’s fastest-growing economy through 2024-25. The International Monetary Fund (IMF) revised its GDP growth projection for the UAE to approximately 4% for 2024, up from its previous forecast of 3.5%.
The UAE’s economy has consistently outperformed others in the Gulf region, driven by a robust non-oil sector. James Swanston, an economist for the MENA region at Capital Economics, highlighted that this strong performance is expected to continue, enabling the UAE to maintain its position as the region’s fastest-growing economy.
First-quarter GDP data for 2024 from Abu Dhabi and Dubai showed a modest slowdown in economic growth. Abu Dhabi’s growth decelerated from 4.1% year-on-year in Q4 2023 to 3.3% in Q1 2024, with both the oil and non-oil sectors experiencing slower growth. However, oil production volumes in Q2 remained steady, with a year-on-year improvement from -4.2% in Q1 to -1.0%, marking the fastest pace of oil output growth since Q1 2023.
Similarly, Dubai’s growth eased to 3.2% in Q1 2024. Given the size of these two Emirates, it is likely that national growth also slowed.
Swanston anticipates that the UAE’s economy will grow by 3.3% in 2024, with a slight softening in the non-oil private sector and constrained oil output. However, this would still position the UAE as the Gulf’s fastest-growing economy. As oil output increases next year, GDP growth is expected to accelerate to 5.5% in 2025, well above the consensus forecast.
Earlier this year, the Central Bank of the UAE projected strong growth of 4.2% for 2024 and 5.2% for 2025, driven mainly by non-oil GDP. The IMF’s May projection also reflects this positive outlook.
At the recent OPEC+ meeting, the group agreed to maintain oil output levels until October, with plans to unwind voluntary cuts thereafter. The UAE secured a favorable increase in its base production quota, effective January 2025. While falling oil prices pose a risk of delaying planned output increases, the oil sector is expected to boost the UAE’s economy and significantly accelerate oil GDP growth in the coming quarters.
Capital Economics also noted that growth in Gulf economies is likely to pick up as oil output rises from October. However, the outlook may become more challenging from 2025 as oil prices decline and maintaining loose fiscal policies becomes more difficult. Outside the Gulf, macroeconomic imbalances are easing, but continued reforms and tight policies will be essential to sustaining recoveries.
