The UAE’s economic growth prospects for 2023 face key obstacles, including a decline in oil output resulting from OPEC-agreed production cuts, a slowdown in the non-oil sector due to higher interest rates, and subdued external demand, a new report from GlobalData shows.
The real GDP of the UAE is forecast to expand at a slower pace of 3% in 2023, compared to the robust growth rate of 7.6% observed in 2022, according to GlobalData, a leading data and analytics company.
GlobalData’s latest report, ‘Macroeconomic Outlook Report: UAE,’ reveals that with around 30% of the country’s GDP and 13% of total exports, oil and gas industry plays a crucial role in the UAE’s economy. The year 2022 witnessed a significant economic upturn, with a growth rate of 7.6%, the highest since 2007, primarily fueled by surging oil and gas prices. However, the decline in oil and gas prices since the beginning of 2023, expected to persist throughout the year, directly impacts the UAE’s economic growth prospects for the current year.
Indrajit Banerjee, economic research analyst at GlobalData, comments, “To make the economy less vulnerable to external shocks, it remains crucial for the government to persist in its endeavour to diversify the economy. Abu Dhabi’s plan to invest $2.7 billion to double the size of the manufacturing sector by 2031, and the adoption UAE Circular Economy Policy 2031 that focuses on manufacturing, food, green infrastructure, and sustainable transport, reflects the government’s urge to transform to a more diversified economic base.”
The UAE has undertaken several development projects with an investment of $23 billion in July 2022 to significantly boost construction and allied activities and create jobs opportunities. Some of the ongoing projects include the railway network project under Etihad Rail’s supervision of $11 billio) by 2024, the construction of Dubai urban tech district by 2024, the expansion of the capacity of the Rashid solar park by 2025. These projects are expected to drive the construction activities, which GlobalData forecasts to rise by an average of 2% over 2023-25.
Banerjee concludes: “Even though, the UAE’s economic growth outlook for 2023 faces challenges, the ongoing diversification efforts and development projects aimed at strengthening the economy will play a vital role in reducing its vulnerability to external shocks.”
