Emirates NBD raises UAE growth forecast to 7% in 2022 on oil output and 'robust' rebound

Lender's estimate for Emirates' non-oil economy has been revised upward to 4.7% in 2022 from 4.1%

Aerial view of Abu Dhabi. Business activity in the UAE's non-oil private sector economy has bounced back strongly in 2022. Courtesy: DCT Abu Dhabi

Emirates NBD has raised its economic growth forecast for the UAE to 7 per cent for 2022, due to a higher estimate for the energy industry's output and the "robust growth" of its non-oil sector, setting up the country for its fastest annual expansion in over a decade.

The latest revision from Dubai's biggest lender compares with an earlier 5.7 per cent estimate and would be the highest since 2011, when the economy grew by 6.9 per cent.

Last week, Abu Dhabi Commercial Bank raised its UAE growth forecast for this year to 6.2 per cent from an earlier 6.0 per cent estimate, largely on the back of strong real non-oil GDP growth.

The UAE economy is expected to grow by 5.4 per cent and 4.2 per cent in 2022 and 2023, respectively after expanding by 3.8 per cent in 2021, according to the Central Bank of the UAE.

"The UAE economy has grown faster than we had anticipated at the start of the year, both in the oil and non-oil sectors," Khatija Haque, Emirates NBD's chief economist, said on Wednesday.

"While we expect the pace of growth has moderated over the course of the year, particularly in the second half, we have revised up our forecast for 2022."

The upward revision comes after the latest government economic indicators show gross domestic product for the UAE expanded by an annual 8.4 per cent in the first quarter of 2022, with the non-oil sectors expanding by 8.8 per cent from a year earlier. The UAE economy has rebounded strongly on the back of tourism, a buoyant property sector and higher oil prices.

The S&P Global Purchasing Managers’ Index for the UAE climbed to 56.7 in August from 55.4 in July, the quickest rise in non-oil business activity since June 2019.

The UAE’s foreign trade for the first six months of this year exceeded Dh1 trillion ($272 billion), compared with Dh840bn for the same period before the pandemic.

The tourism sector’s revenue exceeded Dh19bn during the first half of this year and total hotel guests in the same period reached 12 million. Growth in the number of hotel guests climbed by 42 per cent, compared with the same period before the pandemic.

In Dubai, average residential property prices increased by 10 per cent in the year to June, with apartment prices nearly 9 per cent higher on average and villa prices increasing by 19 per cent, a CBRE report found. In July, Dubai also recorded the highest number of sales transactions in the past 12 years, Property Finder said.

Abu Dhabi recorded 7,474 property transactions worth more than Dh22.51 billion in the first six months of the year.

Given the strength of the UAE economy's rebound, Emirates NBD revised up its forecast for non-oil sector GDP to 4.7 per cent in 2022 from 4.1 per cent.

The UAE’s crude oil output has increased by 13 per cent in the first eight months of this year, relative to full year 2021 production, Emirates NBD said.

"Plans to boost oil production capacity ... indicates greater investment in oil and gas infrastructure, which will underpin growth in the sector over the medium term, even if current production is curtailed by Opec+ in the coming months," Ms Haque said.

Emirates NBD now expects hydrocarbons GDP to grow by 13 per cent in 2022, compared with a previous 10 per cent estimate.

Despite a slowing global economy owing to high inflation worldwide and other headwinds as well as monetary tightening by central banks worldwide, the UAE is on a strong footing, Ms Haque said.

"The UAE is in the enviable position of running a fiscal surplus ― which we expect will remain the case in 2023 ― with a strong balance sheet."

"This should allow the public sector to continue to invest domestically in order to achieve its longer-term strategic goals."