Buoyed by strong performance in non-oil sectors, the UAE economy is on track to expand at the fastest clip in the region while Saudi Arabia will grow at a slower pace this year than previously predicted as oil prices drop from recent peaks.
The UAE’s economy, expected to show strong performance in non-oil sectors, was forecast to expand 4.0 per cent in 2024, an upgrade from 3.8 per cent in January’s poll, according to a Reuter’s poll.
With oil prices not expected to rise significantly this year, economists now predict weaker growth for Saudi Arabia’s oil-dependent economy. The latest Reuters poll forecast that the Saudi economy would expand 1.9 per cent in 2024, down from 3.0 per cent in a January poll.
“The slower expansion in the Saudi economy this year will be down to ongoing oil production curbs … due to be maintained through Q2 at least. When looking at the non-oil sector, we hold a more bullish outlook,” said Daniel Richards, Mena economist at Emirates NBD.
Growth expectations for Qatar, Bahrain, and Kuwait for this year were cut to 2.2 per cent, 2.3 per cent, and 0.6 per cent, respectively, from 2.4 per cent, 2.8 per cent, and 1.8 per cent.
The International Monetary Fund forecast growth in the Gulf region to average 2.4 per cent in 2024, slightly lower than the Reuters poll prediction of 2.5 per cent. The World Economic Outlook released by the IMF predicted 4.2 per cent GDP growth for 2025 as compared to 3.5 per cent for 2024 and 3.4 per cent for last year.
“In the post-pandemic era, the UAE’s economy is being mainly driven by confidence in its policies, attracting talent and foreign direct investment from around the world in key sectors, especially real estate, travel and tourism and retail sectors. In addition, high oil prices are also supporting the growth of the economy,” the IMF observed.
The latest Economic Insight report for the Middle East, commissioned by ICAEW and compiled by Oxford Economics, projects a slowdown in the GCC in 2024 as oil production cuts persist. The GCC growth forecast has been revised down to 2.7 per cent from 3.9 per cent three months ago, while non-energy sectors are expected to drive growth in Saudi Arabia and the UAE.
Despite the energy sector exerting downward pressure on GCC economic growth, robust non-energy performance is expected to offset some of the impact. However, disruptions in shipping routes through the Red Sea and Suez Canal have pushed up freight and raw material costs, suggesting possible loss of momentum in the coming months, said the report.
S&P Global Ratings, the world’s leading credit rating agency, estimates that increased oil production and support from non-oil sectors will drive economic growth in the UAE this year. The non-oil GDP is likely to continue growing, driven by the performance of the hospitality, real estate, and financial services sectors.
“Across the Gulf economies, we think there could be a slight bump to inflation profiles over the coming months, but nothing significant,” said James Swanston, Middle East and North Africa economist at Capital Economics.
“We expect inflation to slow over the second half of this year and remain lower in the Gulf relative to other emerging market economies this year.”
Inflation in the region was forecast to range between 1.3 per cent and 2.8 per cent in 2024, with the lowest in Bahrain and the highest in Kuwait. Saudi Arabia’s inflation was expected to average 2.0 per cent this year, with the rate in the UAE and Qatar projected at 2.4 per cent.
