CBUAE Increases GDP Growth Projections To 4% For 2024 And 6% For 2025 Amid Economic Recovery

The Central Bank of the UAE (CBUAE) has updated its GDP growth forecast for 2024, raising it to 4% from the previous 3.9%. This adjustment reflects improvements in the oil sector. By 2025, growth is anticipated to reach 6%, driven by continued momentum in non-hydrocarbon sectors and a significant increase in hydrocarbon production.

The non-hydrocarbon GDP is expected to grow robustly, with projections of 5.2% in 2024 and 5.3% in 2025. This growth stems from strategic government initiatives aimed at attracting foreign investments and supporting key non-oil activities. Reforms such as full foreign business ownership and tax changes are also contributing factors.

The hydrocarbon sector is projected to expand by 0.7% in 2024, followed by a substantial increase of 7.7% in 2025. The Quarterly Economic Review highlights tourism, transportation, financial services, construction, real estate, and communications as key growth drivers. However, current oil production levels may slightly moderate overall growth in 2024.

In the first quarter of 2024, the UAE's fiscal balance remained positive at AED23.5 billion, accounting for 4.9% of GDP. This compares to AED23.2 billion or 5.1% of GDP during the same period in 2023. Consolidated budget revenue rose by 4.3% year-on-year to AED120.6 billion or 24.9% of GDP, largely due to a notable increase of 32.5% in tax revenues.

Government spending reached AED97.1 billion or 20% of GDP in Q1 2024, marking a year-on-year rise of 5%. Key expenditure areas included employee compensation (AED30.3 billion), goods and services (AED25.9 billion), and social benefits (AED16.8 billion), which grew by varying percentages year-on-year.

Employment and Wage Developments

The number of employees under the CBUAE Wage Protection System remained stable year-on-year as of June 2024, while average salaries increased by 4.8%. These trends indicate strong domestic consumption and sustainable GDP growth prospects.

Capital expenditure saw a remarkable increase, exceeding sevenfold to reach AED5.6 billion during this period.

Sectoral Contributions to Growth

In Q2 2024, the non-oil sectors maintained their growth trajectory but at a slower pace than before. Wholesale and retail trade, manufacturing, and construction were key contributors to this expansion.

The wholesale and retail trade sector benefited from Comprehensive Economic Partnership Agreements (CEPA) and visa reforms that boosted trade volumes and transactions.

Manufacturing attracted more foreign direct investment (FDI), aligning with "Operation 300 Billion." The construction sector also experienced growth through projects like Etihad Rail and Dubai Creek Harbor.

The UAE's fiscal conditions have become more stable due to an increased share of tax revenue in total revenue—from 45.8% in Q1 2022 to nearly 70% in Q1 2024—largely attributed to new corporate taxes.

These developments highlight the UAE's economic resilience and strategic focus on diversifying its economy beyond oil dependence while maintaining fiscal stability through enhanced revenue streams.

With inputs from WAM