The Central Bank of the UAE (CBUAE) has updated its GDP growth forecast for 2024, raising it to 4 percent from the previous estimate of 3.9 percent, thanks to stronger performance in the oil sector.
Looking ahead to 2025, growth is anticipated to rise to 6 percent, driven by sustained momentum in the non-hydrocarbon sector, alongside a significant increase in hydrocarbon production.
Sectoral contributions to growth
As outlined in the Quarterly Economic Review released by the central bank, growth projections are primarily influenced by the tourism, transportation, financial and insurance services, construction and real estate, and communications sectors. However, the current level of oil production in 2024 is expected to slightly temper overall growth, WAM reported.
Non-hydrocarbon sector performance
Non-hydrocarbon GDP growth is projected to remain robust at 5.2 percent in 2024 and 5.3 percent in 2025. This growth is largely attributed to the government’s strategic initiatives aimed at attracting foreign investment and fostering sectors that significantly contribute to non-oil GDP, alongside ongoing structural reforms such as the allowance for 100 percent foreign ownership of businesses and various tax reforms.
Hydrocarbon sector outlook
The hydrocarbon sector is forecasted to grow by 0.7 percent in 2024, with further expansion of 7.7 percent expected in 2025.
Fiscal balance and revenue growth
For the first quarter of 2024, the fiscal balance remained positive at AED23.5 billion, constituting 4.9 percent of GDP, compared to AED23.2 billion or 5.1 percent of GDP in the same period of 2023.
Increased revenue generation
The consolidated budget revenue for January to March 2024 increased by 4.3 percent compared to the previous year, totaling AED120.6 billion, which accounts for 24.9 percent of GDP. This increase was largely driven by a significant 32.5 percent rise in tax revenues year-on-year.
Stability in fiscal conditions
The fiscal landscape of the UAE has shown greater stability, evidenced by the increasing share of tax revenue in total revenue, which has grown from 45.8 percent in Q1 2022 to nearly 70 percent in Q1 2024, largely due to the recent implementation of corporate tax.
Government expenditure trends
Government spending in the first quarter of 2024 amounted to AED97.1 billion, or 20 percent of GDP, reflecting a 5 percent increase compared to the previous year. Key expenditure categories, including employee compensation (AED30.3 billion), goods and services (AED25.9 billion), and social benefits (AED16.8 billion), saw year-on-year increases of 6.3 percent, 15.2 percent, and 3.4 percent, respectively. Additionally, capital expenditure surged more than sevenfold to reach AED5.6 billion.
Employment and wage growth
The number of employees covered by the CBUAE Wage Protection System (WPS) remained stable year-on-year in June 2024, while the average salary for employees increased by 4.8 percent year-on-year. These encouraging trends in employment and wage growth indicate strong domestic consumption and sustainable GDP growth prospects.
Read more: Experts forecast robust growth for the UAE economy in 2024 amid global challenges
Continued growth in non-oil sectors
In Q2 2024, the 16 non-oil sectors maintained their strong growth trajectory, albeit at a slightly slower pace. Wholesale and retail trade, manufacturing, and construction have continued to be vital components of non-oil sector expansion.
Trade and investment dynamics
In the wholesale and retail trade sector, various CEPA agreements and visa reforms have contributed to rising trade volumes and transaction numbers. The manufacturing sector has attracted increased foreign direct investment, aligning with the “Operation 300 billion” initiative. Meanwhile, the construction sector has experienced growth, driven by numerous new and ongoing infrastructure projects, including Etihad Rail and Dubai Creek Harbor.
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