UAE's economy grows 3.4% in Q1 on non-oil sector boost

Financial and insurance activities rise by 7.9% amid increase in local credit to private sector

Tourists at the Corniche in Abu Dhabi. The UAE's non-oil sectors have been expanding in recent years. Khushnum Bhandari / The National

The UAE economy grew by 3.4 per cent in the first quarter of the year, with a strong performance by the non-oil sector driving the expansion.

The country’s real GDP reached Dh430 billion ($117 billion) during the January to March period, the Ministry of Economy said on Monday, quoting preliminary estimates from the Federal Competitiveness and Statistics Centre. The non-oil sector expanded by 4 per cent year on year during the quarter, led by financial and insurance activities, which grew by 7.9 per cent.

“This growth can be attributed to the significant increase in the local credit granted to the private sector,” the ministry said.

The GDP figures “underline the resilience and vitality of the national economy and exemplify its ability to continue on the path of sustainable growth” and also “reflect the UAE’s commitment to fostering economic diversification focused on knowledge economy sectors”, said Abdulla bin Touq, Minister of Economy.

The UAE, the Arab world's second-largest economy, has been focusing heavily on diversifying its economy away from oil by developing sectors such as technology, manufacturing, tourism, trade and innovation. The country has introduced several reforms including longer-stay residence visas as well as new visa categories to attract more talent.

Its non-oil foreign trade hit a record Dh1.4 trillion in the first six months of this year as it continues to forge closer trade ties with partners around the world.

The UAE's economy rose by 3.6 per cent last year, driven by a 6.2 per cent boost from the non-oil sector, the UAE Central Bank said in June. The banking regular revised down its growth projections for 2024 to 3.9 per cent from a previous estimate of 4.2 per cent, mainly due to a drop in oil output.

Growth is projected to accelerate to 6.2 per cent next year, with oil production forecast to increase significantly as Opec eases cuts, while the non-oil sector continues to grow, the Central Bank said.

The UAE's 2031 vision aims to raise its GDP to Dh3 trillion by the next decade.

In the first quarter of this year, the non-oil sector received a boost from the transport and storage industry, which grew by 7.3 per cent, the Ministry of Economy said. This growth was driven by the "notable increase" in the number of people passing through the country's airports, which reached 36.5 million during the first three months of this year, up 14.7 per cent annually.

"The UAE's ports have demonstrated exceptional performance during this time, with Dubai's international ports witnessing a 3.7 per cent growth in the number of containers handled, while Abu Dhabi's ports experienced a 36 per cent increase in cargo-handling volume on an annual basis," the ministry added.

Construction and building activities grew 6.2 per cent in line with the "several development projects initiated by the UAE government in early 2024", the ministry said. They saw a "substantial rise" in the government’s public capital expenditures, reaching Dh4.8 billion.

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The restaurant and hotel sector also expanded 4.6 per cent, mainly due to a boost in tourism, with Dubai alone welcoming 5.18 million international tourists in the first quarter.

The UAE is predicted to be the 10th biggest recipient of inbound tourism spending globally this year, the World Travel and Tourism Council said last week. International visitors to the UAE will spend an estimated $52.2 billion in the country this year, up 9.4 per cent annually, the tourism body said in a report.

Overall, trade made the largest contribution to the UAE's non-oil GDP in the first quarter, accounting for 16.1 per cent, the Ministry of Economy said. It was followed by manufacturing (14.6 per cent), financial and insurance activities (13.4 per cent), construction and building (11.8 per cent) and real estate (7.1 per cent).