UAE Economic Forecast

GDP growth was the highest in over a decade last year but then appeared to slow in the first six months of this year. Abu Dhabi—the largest emirate—grew roughly half as much as it did in 2022, and Dubai—the second-largest—also expanded at a weaker pace. In the second half of the year, the economy is likely cooling further. The country pumped 7.3% less crude in July–October than it did in the same period last year, after agreeing with OPEC+ earlier in the year to curb output. That said, non-oil business activity rose to the highest level in four years in October, tempering any potential slowdown. In related news, the COP28 U.N. climate summit will kick off in the UAE on 30 November, coinciding with the introduction of a number of policies by the government to reduce emissions that will likely boost the relative size of the non-oil sector ahead.

Inflation in Dubai—the second-largest emirate by GDP—rose to 4.3% in October from 3.8% in September. Meanwhile, recent data shows that, in the UAE as a whole, inflation fell to 3.6% in Q1 2023 from 4.6% in the prior quarter. In 2024, UAE inflation is set to ease from 2023 on a tougher base effect and past interest rate hikes. Commodity price spikes pose an upside risk.