The UAE's economic growth is expected accelerate to 5% in 2025, with the expansion being powered by the same pace of growth in both the oil and non-oil sectors, said an Emirates NBD Research note.
"Despite the recent extension of OPEC+ production curbs, we maintain our expectation for a modest increase in oil production later in the year, while base effects will also be favourable through the first half and so we have kept our forecast intact, it said.
The research said it also remains bullish on the non-oil economy. "The Central Bank of the UAE has begun cutting interest rates in tandem with the US Federal Reserve, and we anticipate a further three cuts next year which should be supportive of activity in the private sector, from both households and businesses.
Public investment, meanwhile, will also play a key role, with major infrastructure projects such as the Etihad Rail Network, Kizad Port, Abu Dhabi Metro, the Al Maktoum Airport and the Blue metro line in Dubai all moving forward.
FDI inflows remain strong, and while population growth may slow from the pace seen over the past several years, government targets and ongoing reform initiatives should continue to encourage an inflow of new arrivals, the research said.
The prospect of a renewed global trade war under a second Trump presidency does pose a potential challenge to the logistics sector, but the UAE’s signing of new CEPA trade deals with varied and disparate trade partners all over the world would help insulate it from any fallout. Earlier this month a new deal was reached with the Eurasian Economic Union following earlier agreements reached with countries including India, Turkey, Costa Rica, and Georgia, it noted.
STRONG NON-OIL GROWTH
The UAE recorded real GDP growth of 3.6% year on year (y/y) in the first half of 2024, according to preliminary national accounts data from the FCSA, with Q2 growth of 3.9% y/y following the 3.4% recorded in the first quarter.
Non-oil GDP outpaced the oil sector as it expanded by 4.8% in Q2, an acceleration on the 4.0% in Q1, while ongoing OPEC+ oil production curbs kept hydrocarbons growth at more moderate 1.2% y/y, down slightly from 1.4% growth in the previous quarter but an acceleration on the 3.1% contraction seen in 2023. As a result, the non-oil economy accounted for a historically high 74.9% of GDP in the second quarter, testament also to ongoing diversification efforts and the growth of new and established non-oil sectors, said Emirates NBD Research.
The travel and tourism sectors continued to power non-oil growth in Q2, and transport & storage was the fastest growing component of GDP, logging Q2 growth of 9.3% following 7.3% in Q1, and accounting for 5.6% of total output. The sector has been boosted in particular by strong growth at the UAE’s two primary airports of AUH and DXB, which have seen robust y/y growth in passengers.
At Abu Dhabi, H1 passenger numbers were up 34% while Dubai International saw a gain of 8% and is on track for a record year this year.
The logistics sector has also seen a strong year so far, with Jebel Ali seeing H1 container throughput rise 3.9% y/y to 7.3 million TEUs.
ACCOMMODATION FLOURISHES
Other sectors related to tourism also performed well, with accommodation & food services seeing Q2 growth of 5.8%, up from 4.6% in Q1. Visitor numbers to the UAE have continued to increase even as post-pandemic reopening gains are all long won, with Dubai seeing 15 million visitors over the January to October period, y/y growth of 7.6%.
According to the Ministry of Economy statement, total visitor numbers to the UAE hit 15.3 million over the first half of the year, up 10.5% on the same period in 2023.
The robust growth in accommodation & food services also likely reflects the ongoing expansion in the population of the UAE, with proxy indicators such as mobile phone subscriptions, school enrolments, and utilities contracts all pointing towards an increased number of residents this year.
This was backed up by 3.9% growth in utilities in Q2, still strong though down from 5.9% in Q1. Wholesale & retail trade, the largest non-oil component of UAE GDP (12.6% of output in Q2) and a more mature sector, saw growth of 2.8% in Q2, up from 2.2% the previous quarter. Manufacturing is the second-largest non-oil GDP component (11.6%) and it expanded by 2.4% in Q2, up from 1.9% in Q1, reflecting government-led efforts to boost the sector.
FINANICAL SERVICES
Financial services grew 7.2% in Q2, following a 7.9% expansion in the first quarter, with Abu Dhabi’s sector in particular seeing strong growth this year as hedge funds and other related bodies opened new offices in the ‘capital of capital’.
As money managers have flooded in, company registrations at the ADGM rose by 31% y/y in H1, with assets under management up by 226%, according to the centre, while Dubai’s sector has also continued to expand.
The H1 growth figure for the UAE economy is broadly in line with Emirates NBD Research's full-year forecast for 3.7% growth this year, which would be up marginally from the 3.6% seen in 2023, it said. - TradeArabia News Service
