The UAE is optimistic about its prospects for economic growth in the fourth quarter of the year. Factors like a growing population, government spending, non-oil sector expansion, and tourism have so far contributed to a robust economy. Experts are anticipating a flourishing year and predicting further positive trends in the near future.
The UAE Central Bank has projected a 3.3 percent growth rate for this year and an even more impressive 4.3 percent for 2024. This optimistic outlook aligns with the October projections of the International Monetary Fund (IMF), which predicted a 3.4 percent expansion in 2023. Additionally, it forecasts a 4.0 percent growth rate in 2024. These projections signify the country’s continued economic recovery and resilience.
Tourism sector’s resilience
Khatija Haque, head of research at Emirates NBD, points to the remarkable recovery in the UAE’s hotel industry as a sign of good things in store. Hotel indicators reveal a full recovery from the pandemic, with occupancy rates and revenue per available room surpassing pre-Covid levels.
Notably, the high season in the fourth quarter of 2023 holds promise, with hotels reporting full occupancy. That is bolstered by the upcoming COP28 event in Dubai and bookings for the early months of 2024.
Thriving non-oil sector
James Swanston, MENA region economist at Capital Economics, emphasizes the strength of UAE’s non-oil sector this year. The non-oil foreign trade of the UAE surged to a record AED1.239 trillion in the first half of 2023, marking a 14.4 percent growth compared to 2022. This highlights the importance of the diversification of the UAE’s economy and the resilience of non-oil sectors in the face of global challenges.
Moreover, Dubai’s economy contributed to a GDP growth of 3.2 percent in the first half of 2023. The second quarter saw an acceleration in growth to 3.6 percent, exceeding the 2.8 percent recorded in the first quarter. This consistent growth highlights Dubai’s position as a regional economic powerhouse.
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Cautious optimism for 2024
Haque remains cautious about the economic outlook for 2024. Higher interest rates, which have been on a steady incline since the pandemic, could potentially impact non-oil sector growth. However, their effects may take some time to fully materialize.
“With interest rates now expected to remain higher for longer into 2024 – given the apparent resilience of the US economy to tighter monetary policy – uncertainty around the outlook for 2024 remains high” Haque stated.
She emphasized the danger of increased borrowing costs and their effect on private-sector consumption and investment. On the other hand, the strong dollar may make the region more expensive for tourists.
Thus, to counterbalance the potential decrease in investment, Haque expects the government to maintain its strategic investment in key growth sectors. For example, AED68 billion worth of infrastructure projects are currently underway and scheduled for completion by 2028. Moreover, an additional Dh116.3 billion is in the planning stages through 2030. These investments demonstrate the government’s commitment to long-term economic stability.
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