The UAE economy expanded by 3.7 per cent annually in the first half of the year, driven by strong non-oil sector growth as the country continues to pursue its diversification goals, Minister of Economy Abdulla bin Touq has said.
While the first-half rate of economic growth “may seem modest” compared with last year, it is still “robust growth against the backdrop of global and regional uncertainty”, Mr bin Touq told the AIM summit in Dubai on Monday.
The non-oil sector's “staggering” 5.9 per cent growth in the first six months of the year is “even better news”, as it accounts for about 71 per cent of gross domestic product, illustrating the success of the UAE’s diversification initiatives, he said.
“The UAE’s economic growth is a testament to our resilience, diversification and commitment to openness and international co-operation,” Mr bin Touq said.
“As we look ahead, we are more determined than ever to build a sustainable and inclusive economy. Our policy and initiatives are firmly anchored in a vision of prosperity for people and a thriving business environment and the leadership role in global affairs.”
Non-oil GDP in the Arab world's second-largest economy rose by 4.5 per cent on an annual basis to Dh312 billion ($84.9 billion) for the January-March period.
The country's economy rebounded strongly last year from the slowdown caused by Covid-19, growing by 7.9 per cent in 2022, the most in 11 years, to Dh1.62 trillion at constant prices.
The resurgence came on the back of higher oil prices and government measures to mitigate the impact of the pandemic.
The UAE's economy grew by 3.8 per cent on an annual basis in the first quarter of this year to Dh418.3 billion ($113.9 billion), from Dh403.3 billion a year ago, Mr bin Touq said in August, quoting preliminary estimates from the Federal Centre for Competitiveness and Statistics.
Economic growth momentum is expected to continue for the second half of the year, with the UAE's GDP estimated to expand by 3.6 per cent in 2023, he said.
An array of measures adopted by the government have improved the resilience of the economy despite the challenges of inflation, monetary policy uncertainty and slowing global economic growth.
“These external factors have tested the resilience and adaptability of countries and economies worldwide, and have posed significant challenges to economies around the world,” Mr bin Touq said.
With growing public and private debt and the possibility of “some degree of financial instability” still present, policymakers globally are facing challenging times, he said.
“The policymakers are not facing a dilemma any more – the classic trade-off between growth and inflation. What they're facing is a 'trilemma' as they also have to worry about financial stability,” he said.
The geopolitical uncertainty in the region is another factor adding to global economic headwinds, "in a way amplifying all the challenges that existed, and they were already significant", Mohamed El-Erian, chief economic adviser at Allianz, told delegates on Monday.
"The longer this conflict [the Israel-Gaza war] goes on, the more likely it's going to escalate. The higher the risk of escalation, the higher the risk of contagion to the rest of the world in terms of economics and finance," Mr El-Erian said.
"The third thing to remember is that contagion would add to problems of economic growth to the inflation channels and to the fragmentation of the global economy."
The past decade has generally been difficult for the region, but the UAE has managed to find a way forward by being "very agile" and moving at a brisk pace in term of policy changes, Mr bin Touq said.
"We have changed about 15 laws in the last two years to show that agility in our markets," he said.
The UAE's economy has developed resilience through policy measures, including changes to commercial laws.
"We have changed in the last few years and have diversified a lot of things and we're going to keep on doing [that]," Mr bin Touq said.
"It'll take [some] time for our economy to really show these policies' impact."