UAE Economy to Grow in 2024 on Strong Oil: UBS

The UAE's gross domestic product (GDP) is likely to hit 3.5% in 2023, rising to 3.9% next year on the country’s medium-term growth prospects, supported by a strong demand for its oil exports and energy investments, said Michael Bolliger, Chief Investment Officer, Emerging Markets at UBS Global Wealth Management (UBS).

The introduction of a 9% corporate tax this year, following the adoption of 5% value-added tax (VAT) in 2018, is contributing to bolstering public finances, stated Bollinger while speaking to Wam. These measures, along the established initiatives will further help reduce the economy’s dependence on the hydrocarbon sector, will further diversify the economy.

Bolliger shared the bank's positive outlook on the UAE’s medium-term growth prospects, supported by strong demand for its oil exports and energy investments, while expecting a strong 4.5% expansion for the non-energy part of the economy for this year.

"This, in turn, contributes to supporting macroeconomic stability as well as the country’s fiscal accounts and its balance of payment, further boosting the country’s attractiveness as a destination for foreign direct and portfolio investments," he added.

Bolliger stressed that the UAE's renewables sector has a bright future, as the country aims to reach net-zero carbon emissions by 2050 through expanding the share of renewables in its energy mix, investments in sustainable desalination technologies, and emission reduction in the overall economy.

The structural and social reforms and programs launched recently by the UAE will be positive catalysts to support the country’s ability to structurally grow at a rate of around 4% per annum, he said, adding that "relying more on renewable energy domestically and improving the energy efficiency will free up more hydrocarbons for the export market, which will translates into positive effects for the UAE’s fiscal balance and its balance of payment."

On hosting COP28, Bolliger said that the event offers a great opportunity for the UAE to help drive the global effort against climate change and to highlight its own net-zero strategy. "The UAE is among the most competitive regions globally in producing renewable energy, with the country hosting several of the world's largest and most cost efficient solar power plants," he added.

The top UBS official pointed out that global economic growth may witness a fall toward late 2023 or early 2024 due to highly restrictive monetary policy, adding that global economy is holding up longer than expected as consumer spending and labor markets continue to surprise positively. "We expect inflation to continue to slow in the US and in Europe, ending the year above central bank targets before normalizing by mid-2024," Bollinger told Wam.

"This should allow the US Federal Reserve, European Central Bank (ECB), Swiss National Bank (SNB), and Bank of England (BoE) to complete their hiking cycles by midyear, then stay on hold for some months before rate cuts become more likely toward end-2023 or early 2024," he added.