The United Arab Emirates (UAE) is expected to see its gross domestic product (GDP) grow by 3.5% in 2023, further increasing to 3.9% in 2024, according to UBS Global Wealth Management. This optimistic outlook is attributed to robust oil exports and energy investments, as well as recent tax reforms and initiatives that aim to diversify the economy and reduce dependency on the hydrocarbon sector.
Michael Bolliger, chief investment officer, emerging markets at UBS Global Wealth Management, shared the bank's positive view on the UAE's medium-term growth prospects. The introduction of a 9.0% corporate tax in 2023, following the adoption of a 5.0% value-added tax (VAT) in 2018, is seen as a significant factor bolstering public finances.
Bolliger expects strong demand for UAE's oil exports and energy investments to drive a robust 4.5% expansion for the non-energy part of the economy this year. However, he also noted that global economic growth might see a downturn toward late 2023 or early 2024 due to highly restrictive monetary policy.
Last week, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister and Ruler of Dubai, echoed this positive economic outlook. He stated that the UAE is set for its best economic year yet in 2023 and hailed the country's position as a global trading center.
Data from Statista suggests that the second-largest Arab economy's GDP will increase by $140.4 billion (+28.14%) between 2023 and 2028, reaching an estimated $639.34 billion in 2028.
The Central Bank of the UAE has kept its growth forecast unchanged at 4.3% for 2024 in its quarterly economic review. After growing at 9.5% in 2022 with an average production of 3.1 million barrels per day, the country's oil GDP growth in Q1 2023 is estimated to have moderated to 3.1% Y-o-Y, reflecting oil production cuts agreed among OPEC+ members.
Despite these cuts, Bolliger remains optimistic about the future of UAE's renewables sector as the country aims for net-zero carbon emissions by 2050 through expanding renewable energy share in its mix and investing in sustainable desalination technologies.
He added that recent structural and social reforms launched by the UAE could act as positive catalysts supporting the country's ability to structurally grow at a rate of around 4.0% per annum. According to Bolliger, focusing more on domestic renewable energy use and improving energy efficiency will free up more hydrocarbons for export, positively impacting UAE's fiscal balance and balance of payment.
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