UAE: Economic growth slows in Q4 2019 on contracting hydrocarbon sector
According to preliminary data released by the Central Bank of UAE (CBUAE) on 19 February, GDP was estimated to have grown 1.3% in year-on-year terms in the fourth quarter, down considerably from the third quarter’s 2.9% expansion. Despite the fourth-quarter downturn, annual growth for the full year was estimated to have accelerated to 2.9% for 2019, markedly higher than 2018’s 1.7% expansion.
While corroborating data from the UAE’s Federal Competitiveness and Statistics Authority (FCSA) is yet to be released, the Central Bank’s figures point to a contraction in the hydrocarbon sector as the key driver behind the fourth-quarter slowdown. The sector shrank 1.4% year-on-year in Q4, contrasting Q3’s 6.8% expansion. Meanwhile, the non-hydrocarbon sector moderated the downturn, with growth doubling to 2.4% in Q4 (Q3: +1.2% year-on-year).
Despite the slowdown in Q4, the full-year outturn was strong: Growth in the hydrocarbon sector surged 7.6% higher in 2019 (2018: +2.8% yoy), reflecting solid increases in condensates and natural gas production. The non-hydrocarbon economy fared less well, however, with full-year growth falling to the lowest rate since 2011 (2019: +1.1% yoy; 2018: +1.3% yoy), thus weighing on the overall reading marginally.
Regarding the current year, economic activity is expected to cool somewhat as growth in the hydrocarbon sector drops back to more sustainable long-term levels. Furthermore, the coronavirus outbreak is set to hit an already struggling domestic economy, while further OPEC+ production cuts are a key risk to the external sector outlook.