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UAE non-oil economy keeps growth strong despite oil cuts and regional disruption, PwC

UAE non-oil economy keeps growth strong despite oil cuts and regional disruption, PwC
3 Apr 2024 09:40


The UAE’s economy is in robust shape, despite continued cuts in oil production and geopolitical tensions. According to a new report by PwC Middle East, the UAE outpaced IMF growth predictions in 2023 primarily off the back of strong performance of the non-oil sector, with the trend expected to continue this year.

“Despite overall cuts and turbulence, we are still optimistic since we see a varied economy in the UAE,” Stephen Anderson, Partner, Middle East Strategy Leader, PwC Middle East told Aletihad.

“I think the real story is on the non-oil transformation and the way that the UAE has been trying to decarbonise, localise and modernise and how this has given it a diversified economy that we are now seeing reap rewards.”

The PwC Middle East Economy Watch report forecast 4% GDP growth and for inflation to drop from 3.1% in 2023 to 2.3% in 2024. Despite figures from January showing it had increased slightly, Anderson said the UAE was perceived to have a solid grip on inflation, which was breeding confidence in the business community.

“It appears that inflation is aligned, there is a perceived control keeping it around the 3% mark which again, gives investors a lot of confidence,” he said.

The report also predicts a 3.9% growth in non-oil GDP in 2024, coming off the back of an extraordinary result in the first half of 2023 which saw 5.9% YoY growth driven mainly by Abu Dhabi’s 8.6% YoY growth in the first nine months of the same year. Stephen added that the increasing focus on green finance, and sustainable industries had the potential to enhance the attractiveness of the countries non-oil sectors to foreign investors.

According to the report, green bonds and Sukuk in the Middle East more than doubled last year to a value of $24 billion, with the majority coming from the UAE and Saudi Arabia. The UAE, however, dominated in the issuance of private sector bank and corporate bonds, compared to Saudi Arabia which saw most of its value come from its sovereign wealth funds.

Moreover, the report predicted that the increasing trend in green finance would increase in 2024 citing the issuance of Sharjah second sustainable bond as evidence of this.

“I think the UAE is leading the way, you have good deal flows with many still in the pipeline as well. We’ve seen several issuances last year of bonds and Sukuks about 20 across the region… we’re very bullish on growth in the area.” Stephen said.

“In the UAE you see banks, you see large companies like Mubadala making major investments, and I think around 100 million in financing into energy transition, so there is obviously the framework to do that, including the $30 billion ALTÉRRA fund.”

The report also mentions regional geopolitical turbulence and the impact that it is having on the broader regional economy. This is particularly emphasised on the impact of disruptions in Red Sea shipping lanes, with the report highlighting the need for alternative routes. Nevertheless, Stephen said the UAE had thus far shown resilience despite the proximity of the conflicts and disruptions.

“For now, it appears the UAE is quite insulated but clearly the best state for the UAE is a resolution of this situation,” he said.

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