UAE economy to grow an average 3.8% a year to 2023

Country's non-oil economy is projected to grow by an average of 4.1% annually between 2019-23, Dubai Chamber report says

Burj Al Arab lit up in UAE flag colours. Sukuk issance in the 10 largest markets of Islamic bonds fell in 2018. Leslie Pableo / The National

The UAE economy is forecast to grow at an average 3.8 per cent annually in the next five years, supported by an increase in investment flows and a rise in private consumption, according to a study.

The average real gross domestic product – an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year – of the UAE between 2019 and 2023, will also be boosted by the expansionary fiscal policies of the Government, Dubai Chamber of Commerce said in its UAE Macroeconomic Model report, released yesterday.

A growing number of infrastructure and construction investments in the run up to Expo 2020 will also bode well for the overall GDP growth of the second-biggest Arabian Gulf economy, it added.

“A recovery in private consumption and sales of highly cyclical consumer products is expected, extending to products such as vehicles, furniture, household appliances and medical equipment,” the chamber said. “Meanwhile, robust growth in investment is projected on the back of government fiscal stimulus.”

The non-oil economy of the UAE is projected to grow by an average of 4.1 per cent annually between 2019-23, compared to the 2.8 per cent recorded in the 2014-18 period.

The non-oil sector's growth will be driven by other sectors including transport and communications, which are set to grow by 7.9 per cent over the five-year period, followed by construction, expected to expand by 4.2 per cent, and real estate and business services that are expected to record a growth of 3.8 per cent until 2023, said the chamber.

Recent reforms to reduce the cost of doing business in the Emirates are also expected to support growth within the country's small and medium-sized enterprises and private sector businesses.

The UAE's overall economy, which grew only by 0.8 per cent in 2017, mainly on the back of Opec-led oil output cuts and crude price declines, is set to accelerate this year amid a slew of Government measures aimed at propelling the non-oil sector, which accounts for more than 70 per cent of the country's GDP. The Central Bank of the UAE forecasts the economy to grow 4.2 per cent in 2019 as government reforms and stimulus measures start yielding results.

In June, Dubai and Abu Dhabi announced they were exempting companies from administrative fines for at least the rest of last year, as part of efforts to stimulate business growth. Dubai unveiled in April plans to implement measures to help boost economic growth, attract investment and cut the cost of doing business across sectors ranging from tourism to financial services.

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Abu Dhabi, also in 2018, announced a $50-billion three-year stimulus package to support non-oil private sector growth.

The UAE Government in 2018 approved a foreign direct investment law that is expected to boost FDI flows by up to 20 per cent this year, from an average growth rate of 8 per cent, Economy Minister Sultan Al Mansouri said in November. Foreign investment is forecast to rise to $11.5bn (Dh42.4bn) in 2018 from $10.8bn in 2017. The Government is also planning to grant long-term visas of up to 10 years and gave the nod for new low-cost employee insurance policies to help retain talent and attract investors.

In terms of best investment opportunities for Dubai businesses, the emirate’s trade body noted that the Middle East and North Africa accounts for the largest share of Dubai’s exports with 41 per cent. Emerging Asia with 26 per cent follows Mena, Sub-Sahara Africa accounts for 18 per cent, while the CIS, which includes Russia, Azerbaijan and other post-Soviet states, accounts for 1 per cent. The CIS region, along with Latin America at 0.8 per cent, are the two smaller destinations of exports, the chamber said, citing trade data for the first nine months of 2018.

The chamber said that chemicals and allied products was the top-performing product category for Dubai’s exports to Asia. Within Sub-Sahara Africa and Latin America, wood pulp and paperboard was the top category for exporters, while vegetable oils dominated the emirate’s exports to the CIS region.

However, the global economic picture remains uncertain over the medium term, Dubai chamber noted. Total global growth over 2019-23 period looks set to be modest, with real GDP expansion projected to reach an average of 3.6 per cent annually, according to recent projections from the IMF.

On the other hand, emerging markets are expected to see average growth of 4.8 per cent for the period, outperforming advanced economies and the global average.