UAE Economic Outlook
While likely remaining positive, annual GDP growth will likely have waned in the year so far. In Q1, crude production expanded 3.0% year on year, the softest increase since Q2 2021. Moreover, in April, crude production growth slowed further to 0.4% yoy, and in May, the UAE cut output by 144,000 barrels per day, thus further dimming the oil sector’s performance. As a result, the non-oil sector should have remained the engine of growth. The private-sector PMI was comfortably in expansionary territory in Q1, despite cooling somewhat from Q4’s average. In April, the PMI revealed business conditions improved at the strongest rate in six months as demand conditions improved and employment rose robustly. In geopolitics, in late May, Iran claimed sovereignty on three Persian Gulf islands disputed with the UAE, stoking regional tensions.
Inflation in Dubai cooled to a 14-month low of 3.3% in April (March: 4.3%) as prices for transport fell at a steeper pace and food price growth eased. Country-wide data is still unavailable past Q2 2022; that said, in line with price developments in Dubai, our panel sees headline inflation in the UAE cooling this year thanks to tight monetary policy.