UAE’s economy grew by 3.6% in 2023 on non-oil growth

Financial services was the fastest-growing sector last year, expanding 14.3% year-on-year

There was also growth in transport and logistics, construction and real estate services. Khushnum Bhandari / The National

The UAE economy expanded by 3.6 per cent last year, driven by strong non-oil sector growth as the country continues to pursue its diversification goals.

The country's gross domestic product reached Dh1.68 trillion ($456.56 billion) at constant prices last year, preliminary estimates from the Federal Competitiveness and Statistics Centre showed on Thursday.

At current prices, meanwhile, the Emirates' GDP stood at Dh514.13 billion, representing an annual expansion of about 2.3 per cent.

The non-oil sector grew 6.2 per cent to Dh1.25 trillion last year, while the oil and gas sector contracted by 3.1 per cent.

Financial services was the fastest-growing sector in 2023 in the Arab world’s second-largest economy, expanding 14.3 per cent year-on-year after growing 6.6 per cent in 2022.

It was followed by transport and logistics, construction and real estate services, the data showed.

“The UAE’s economy has been remarkably resilient to both a lacklustre external backdrop as well as significantly higher interest rates in 2023,” Khatija Haque, head of research and chief economist at Emirates NBD, said in a research note on Wednesday.

“We expect public sector investment – particularly in transport and other infrastructure – to remain robust in 2024 and beyond, as the government has announced several large long-term projects including the expansion of the Etihad Rail network and Al Maktoum Airport.”

She added that this will continue to underpin non-oil GDP growth, offsetting any moderation in private-sector investment and household consumption.

The Dubai government has approved designs for a new passenger terminal at Al Maktoum International Airport and has started construction at a cost of Dh128 billion. Photo: Dubai government via AP

Spread across 70 square kilometres, the new airport will be five times the size of the current Dubai International Airport. Photo: Dubai government via AP

Once complete, Al Maktoum International Airport will have "the world's largest capacity", reaching up to 260 million passengers. Photo: Dubai government via AP

The Al Maktoum International Airport will fully absorb Dubai International Airport’s operations within 10 years. Photo: Dubai government via AP

A satellite image shows the site of Al Maktoum International Airport. The airport will feature 400 gates, five parallel runways and new aviation technology. Photo: Planet Labs PBC via AP

The Dubai-based lender also raised its forecast for UAE’s non-oil growth this year to 5 per cent from 4.5 per cent previously, increasing the estimate for the country’s headline GDP growth to 3.7 per cent, from 3.3 per cent.

The UAE’s oil and gas production is likely to remain constrained by Opec+ production cuts this year, Emirates NBD said.

The producer alliance is widely expected by analysts to extend voluntary cuts of 2.2 million barrels per day until the end of the year. Opec+ currently has total output curbs of 5.86 million bpd in place, which is equal to about 6 per cent of the global demand.

“If there is an increase in the UAE’s target production level, this would pose an upside risk to our headline GDP growth forecast,” Emirates NBD said.

Earlier this week, the International Monetary Fund said it expected the UAE’s overall real GDP to expand by an annual 4 per cent this year, up from its April estimate of 3.5 per cent economic growth.

The IMF said that economic growth in the Emirates was broad-based, led by robust activity in the tourism, construction, manufacturing and financial services sectors.

The UAE is pursuing several economic initiatives, including Operation 300bn, a programme to position the country as an industrial centre by 2031 through efforts to increase the industrial sector’s GDP contribution to Dh300bn by 2031, from Dh133 billion in 2021.

The country's economy rebounded strongly 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. It has maintained a robust growth momentum since.