UAE Set to Lead GCC Economic Growth in 2024-25 Despite Early Slowdown
The UAE is projected to remain the Gulf's fastest-growing economy in 2024-25, bolstered by a robust non-oil sector, despite a slower start in early 2024. The IMF recently revised its GDP growth forecast for the UAE to approximately 4% in 2024, up from an earlier 3.5%.
James Swanston, an economist for the MENA region at Capital Economics, noted,
“The UAE’s economy has been the strongest performer in the Gulf over the past year or so, and a robust non-oil sector should help the UAE retain its crown as the fastest-growing economy in the region.”
Recent first-quarter 2024 GDP data from Abu Dhabi and Dubai revealed a slight slowdown. Abu Dhabi’s growth decelerated to 3.3% year-on-year from 4.1% in Q4 2023, with both oil and non-oil sectors experiencing slower growth. Conversely, Dubai's GDP growth edged down to 3.2%.
Capital Economics forecasts the UAE’s economy to grow by 3.3% in 2024, driven by a slight softening in the private non-oil economy and constrained oil output. However, the UAE is expected to maintain its status as the Gulf's fastest-growing economy. GDP growth is projected to accelerate to 5.5% in 2025 as oil output rises.
The Central Bank of the UAE has projected strong growth of 4.2% for 2024 and an even higher growth rate of 5.2% for 2025, driven mainly by non-oil GDP. These projections align with the IMF’s updated forecast of around 4% GDP growth in 2024.
GDP Growth in GCC Countries (%)
| Country | 2024 | 2025 |
|---|---|---|
| UAE | 3.3 | 5.5 |
| Saudi Arabia | 2.8 | 4.5 |
| Qatar | 1.0 | 2.3 |
| Kuwait | -1.3 | 4.3 |
| Oman | 2.5 | 5.5 |
| Bahrain | 1.5 | 4.0 |
At the last Opec+ meeting, oil producers agreed to maintain oil output levels until October and plan to increase output thereafter. The UAE secured a favorable increase to its base production quota, effective January 2025, which is expected to boost oil GDP growth.
Capital Economics anticipates that growth in the Gulf economies will pick up in the coming quarters, especially as oil output increases from October. However, challenges may arise from 2025 due to falling oil prices and the difficulty of sustaining loose fiscal policies. The continued implementation of reforms and tight policies will be crucial for maintaining economic stability and recovery in the region.
News Source: Khaleej Times