The World Bank has recently revised its GDP growth forecasts for the United Arab Emirates (UAE) for 2023 and 2024, citing robust expansion in both the oil and non-oil sectors.
Impressive Growth Rates Predicted:
The latest data from the World Bank indicates that the UAE’s economy is expected to grow by 3.4 percent in 2023 and 3.7 percent in 2024, which marks a significant improvement compared to earlier predictions of 2.8 percent and 3.4 percent, respectively.
In the post-pandemic era, several key sectors, including travel and tourism, aviation, hospitality, real estate, trade, and logistics, have played pivotal roles in propelling the UAE’s economic rebound and expediting its recovery.
International Recognition:
The International Monetary Fund (IMF) has also commended the UAE’s swift recovery from the economic fallout of COVID-19.
The IMF highlights strong near-term economic growth driven by a resurgence in domestic activity, while robust oil prices have supported healthy surpluses in fiscal and external balances.
However, it’s worth noting that the UAE’s GDP growth is expected to decelerate from the impressive 6.6 percent recorded in the previous year, as Gulf economies in the region rebounded from record lows during the pandemic.
GCC Region Faces Challenges:
Across the GCC region, growth for 2023 is projected to average 1 percent, a considerable drop compared to the 7.3 percent growth recorded in 2022 and significantly lower than earlier forecasts from April 2023.
Saudi Arabia’s Economic Contraction:
The World Bank’s October report suggests that Saudi Arabia’s economic activity is set to contract by 0.9 percent in 2023, a stark contrast to the 8.7 percent growth witnessed in 2022. This contraction is attributed to reduced oil production levels and subdued prices.
The report also anticipates a recovery in economic activity across the GCC in 2024, contingent on the assumption that OPEC+ production quotas are eased.
Varied Prospects for Oil Exporters and Importers:
Among developing oil exporters, growth in 2023 is expected to be 2.4 percent, a decline from the 4.3 percent seen in 2022.
In contrast, developing oil importers are forecasted to experience an average growth rate of 3.6 percent in 2023, down from 4.9 percent in 2022, according to the World Bank.
Regional and Global Economic Trends:
The Middle East and North Africa (MENA) region’s projected growth in 2023 aligns more closely with the global average, in contrast to 2022, when the region outpaced the rest of the world.
Globally, economic activity is expected to slow to 2.5 percent in 2023, down from 3.1 percent in 2022, as per the latest World Bank Mena Economic Update.
Challenges in the MENA Region:
The region’s GDP is forecasted to decrease to 1.9 percent in 2023 from 6 percent in 2022, primarily due to cuts in oil production, subdued oil prices, tight global financial conditions, and elevated inflation.
By the end of 2023, only eight out of fifteen MENA economies are projected to return to pre-pandemic real GDP per capita levels, highlighting the uneven nature of the recovery.
Impact on Current Accounts and Fiscal Balances:
Additionally, cuts in oil production and subdued oil prices adversely affect MENA’s oil-exporting countries’ current accounts and fiscal balances.
In the GCC, the current account balance is expected to decrease to 9.6 percent of GDP, down from a high of 15.7 percent in 2022, while the fiscal surplus is forecasted to sharply decrease to 0.8 percent of GDP from 4.9 percent in 2022.
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