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.
This year’s growth forecasts for Qatar, Bahrain and Kuwait have been lowered from 2.4%, 2.8% and 1.8% to 2.2%, 2.3% and 0.6%, respectively.
The International Monetary Fund expects average growth in the Gulf region to be 2.4% in 2024, slightly below the 2.5% forecast in a Reuters poll. According to the World Economic Outlook released by the IMF, the GDP growth rate is expected to be 4.2% in 2025, compared to 3.5% in 2024 and 3.4% last year.
“The post-pandemic UAE economy is primarily driven by confidence in its policies, attracting talent and foreign direct investment from around the world, particularly in key sectors such as real estate, travel, tourism and retail.” “Oil prices also support economic growth,” the IMF said.
The latest Middle East Economic Insights Report, commissioned by ICAEW and compiled by Oxford Economics, predicts a slowdown in the Gulf Cooperation Council in 2024 as oil production cuts continue. Growth forecasts for the GCC have been revised down to 2.7% from 3.9% three months ago, while growth in Saudi Arabia and the United Arab Emirates is expected to be led by non-energy sectors.
The energy sector is putting downward pressure on economic growth in the GCC, but strong performance outside the energy sector is expected to offset some of the impact. However, disruptions to shipping routes through the Red Sea and Suez Canal have increased freight and raw material costs, which could cause prices to fall in the coming months, the report said.
S&P Global Ratings, one of the world’s leading ratings agencies, predicts that increased oil production and support from the non-oil sector will drive the UAE’s economic growth this year. Non-oil GDP is expected to continue to grow, driven by the performance of the hospitality, real estate and financial services sectors.
James Swanston, Middle East and North Africa economist at Capital Economics, said: “We think there may be a slight uptick in inflation trends in the Gulf over the coming months, but nothing significant.” ” he said.
“We expect inflation to slow in the second half of this year, and inflation in the Gulf region is expected to remain low this year compared to other emerging markets.” Bahrain is lowest, Kuwait is highest . Average inflation in Saudi Arabia was expected to be 2.0% this year, while inflation in the United Arab Emirates and Qatar was expected to be 2.4%.