UAE Remains the Fastest Growing Economy in the GCC for 2024-25

Strong Growth Amid Challenges

The United Arab Emirates (UAE) is set to maintain its status as the fastest-growing economy in the Gulf Cooperation Council (GCC) for 2024 and 2025, despite facing a slight slowdown at the beginning of this year. Recent forecasts from the International Monetary Fund (IMF) and other economic analysts highlight the resilience of the UAE's economy, particularly its robust non-oil sector, which is expected to drive growth in the coming years.

The IMF has revised its GDP growth forecast for the UAE to approximately 4% for 2024, up from an earlier estimate of 3.5%. This positive outlook reflects the UAE's ability to adapt and thrive in a challenging economic environment, characterized by fluctuating oil prices and global economic uncertainties. James Swanston, an economist for the MENA region at Capital Economics, emphasized that the UAE's economy has been the strongest performer in the Gulf over the past year, largely due to its diversified non-oil sector.

Economic Performance and Projections

Recent data from the first quarter of 2024 revealed a softer start for the UAE's economy, with Abu Dhabi's growth slowing to 3.3% year-on-year, down from 4.1% in the previous quarter. Similarly, Dubai's GDP growth edged down to 3.2%. However, despite these initial setbacks, analysts remain optimistic about the overall trajectory of the economy. Capital Economics forecasts a growth rate of 3.3% for the UAE in 2024, with an acceleration to 5.5% expected in 2025 as oil output rises.

The Central Bank of the UAE has also projected strong growth, estimating a 4.2% increase for 2024 and an even higher 5.2% for 2025, driven primarily by the non-oil sector. This aligns with the IMF's updated forecast, which underscores the UAE's commitment to diversifying its economy and reducing reliance on oil revenues.

The Role of Oil and Non-Oil Sectors

The oil sector remains a critical component of the UAE's economy, but its influence is gradually being overshadowed by the growth of non-oil industries. The recent OPEC+ meeting resulted in an agreement to maintain oil output levels until October, with plans to increase production thereafter. The UAE successfully negotiated a favorable increase to its base production quota, effective January 2025, which is expected to bolster oil GDP growth.

However, the non-oil sector is where the UAE is truly shining. Analysts predict that the non-oil economy will grow at a rate of 5% in 2024, driven by strong private sector consumption and significant public and private investments. The UAE has positioned itself as an attractive destination for foreign direct investment, with inflows rising by 35% to nearly AED 31 billion in 2023. This influx of capital is expected to further stimulate growth in various sectors, including construction, tourism, and technology.

The UAE's economic outlook for 2024-25 remains robust, with projections indicating that it will continue to lead the GCC in growth. The combination of a resilient non-oil sector, strategic investments, and favorable oil production agreements positions the UAE for sustained economic success. As the region navigates the complexities of the global economy, the UAE's adaptability and commitment to diversification will be key factors in maintaining its status as a regional economic powerhouse. The coming years will be crucial as the UAE seeks to balance its oil and non-oil sectors while fostering an environment conducive to innovation and investment.