UAE economy defends gains
25 October 2024
Analysis
John Bambridge
Analysis editor
The UAE economy seems set to maintain its positive heading as the already upbeat forecasts for growth in 2024 and 2025 turn rosier at the prospect of increased output in the hydrocarbons sector amid the anticipated rollback of Opec-led restrictions on oil production.
The Central Bank of the UAE now expects a real GDP growth rate of 4% in 2024, while growth in 2025 is projected to rise as high as 6% if national oil producers are allowed to ramp up their output as expected.
This buoyant forecast is due both to the extremely positive outlook for the oil sector, which is expected to expand by 7.7% in 2025 and far exceed its 0.7% rise in 2024, and the constant support of the UAE’s highly robust non-oil sector.
Pursuant to maintaining this momentum, the UAE is investing heavily both domestically and abroad in sectors that might build on its existing industry or expand into emerging high-growth sectors.
A prominent example of the former is Adnoc International’s $16bn acquisition bid for German plastics group Covestro, which represents a major push into the value chain downstream from the UAE’s oil and gas sector. More broadly, the UAE is investing diversely and buying up stakes in heavy industry, renewables, finance and retail – wherever it espies long-term non-oil value.
Locally, consolidation is key, with banks and real estate developers engaging in mergers to restructure local assets into more streamlined profits vehicles. Growth continues apace in the UAE’s financial sector as fund managers use the emirates as a springboard to launch into project finance and investment opportunities across the region.
At the same time, the UAE aims to place itself at the cutting edge of the artificial intelligence (AI) boom as investors and entrepreneurs vie for market share in the emerging ecosystem for AI-powered tools capable of leveraging existing systems to generate new value across the global economy. There are already more than 400 AI companies in Abu Dhabi and the capital’s state-owned firms are busy forging strategic alliances with global technology giants such as Microsoft, which is actively growing its UAE footprint.
The UAE is also weighing in with its political clout to advance its AI agenda. Easing restrictions on AI chips export from the US to the Middle East was a central theme when UAE President Sheikh Mohamed Bin Zayed Al-Nahyan travelled to Washington in September.
Amid worrying signs in many of the dominant global markets, including China, the EU and the US, the UAE is demonstrating comparatively few signs of underlying weakness. On the contrary, the UAE economy currently appears to be thrumming along like a particularly well-oiled dynamo.
This month's special report on the UAE includes:
> GOVERNMENT: UAE ups growth forecasts and targets AI opportunities
> BANKING: UAE banks reap the harvest
> UPSTREAM: Adnoc’s upstream goals drive spending spree
> DOWNSTREAM: Adnoc curates vast downstream portfolio
> POWER: UAE utilities ramp up capacity procurement
> WATER: UAE PPP activity rises
> CONSTRUCTION: UAE construction consolidates
> TRANSPORT: UAE infrastructure sector is on an upward trajectory
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