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UAE economy reclaims pole position

22 November 2023

 

The UAE has returned to the top of the MEED Economic Activity Index amid the country’s sustained, robust economic performance in 2023, despite the impact of Opec+ production cuts on oil output.

The country is projected to achieve a real GDP growth rate of 3.4 per cent in 2023, and this is forecast to rise to 4 per cent in 2024. The UAE has also returned to fiscal surplus amid higher oil prices, and project activity has surged as the real estate sector has boomed again.

The country has awarded $72bn-worth of contracts in the past 12 months, almost double the long-term annual average of $37bn. The net value of active projects under execution also rose $33bn in the period, as calculated by project awards minus completions.

Mixed GCC performance

Saudi Arabia’s performance has declined, with its real GDP growth rate in 2023 crimped by the Opec+ oil production cuts to just 0.8 per cent, and with Riyadh headed for a fiscal deficit. The country’s growth is forecast to recover to 4 per cent in 2024, and domestic project activity is surging. 

Saudi Arabia’s award of $84bn-worth of contracts in the past 12 months is also almost double the long-term annual average of $43bn. The net value of active projects rose by $54bn. 

Qatar, meanwhile, has an estimated real GDP growth rate of 2.4 per cent in 2023 and a forecast of 2.2 per cent for 2024. The country’s indomitable finances are supported by its soaring gas export revenue. This has led to a fiscal surplus of more than 10 per cent of GDP in 2023. 

Project activity has also recovered in the past 12 months, with $18bn in awards. This value is below the long-term average of $20bn, however, amid shrinkage in the projects market relative to the World Cup boom. The net value of active projects has fallen by $5.5bn.

Kuwait’s economic performance has been hit by the Opec+ cuts, with its real GDP falling by 0.6 per cent, and with only a 3.6 per cent recovery expected in 2024. Despite a 14 per cent nominal fiscal surplus, the projects market continues to underperform, with just $7.5bn-worth of awards in the past 12 months, well below the long-term average of $11bn.

Oman has been similarly hit by the Opec+ cuts, giving it an estimated growth rate of 1.2 per cent for 2023, with a forecast of 2.7 per cent in 2024. The country’s projects market meanwhile saw just $3.9bn of awards in the past 12 months – less than half the long-term annual average of $8.3bn. The period saw a $5bn decline in the net value of active projects.

Bahrain has maintained a steadier economic performance, with 2.7 per cent real GDP growth in 2023 and 3.6 per cent forecast for 2024. Manama remains in fiscal deficit, however, at 5 per cent of GDP in 2023, and its ballooning public debt currently sits at about 120 per cent of GDP. The projects market is also in a dire state, with only $1.2bn in contract awards in the past 12 months.

Beyond the GCC

Jordan leads the non-GCC countries in the index, having tamped down its inflation to 2.7 per cent – the lowest of any non-GCC country – and having maintained an estimated 2.6 per cent real GDP growth rate in 2023. While Amman faces problematic fiscal deficit, debt and unemployment levels, the award of a $3bn contract for the expansion of the Zarqa refinery in January could prove to be a boost for the projects market.

Tunisia’s real GDP output has dimmed to an estimated 1.3 per cent in 2023, and the country is battling 9.5 per cent inflation. Nevertheless, its projects sector has experienced a boost in the past 12 months, with $1.8bn-worth of awards.

Egypt has maintained a healthier estimated 4.2 per cent real GDP growth rate in 2023, but its economy is also overheating, with a 23.5 per cent consumer price inflation rate. The projects market is also losing steam, with contract awards falling to $16.7bn in the past 12 months, down from $37bn in the 12 months prior.

The UAE has returned to fiscal surplus amid higher oil prices, and project activity has surged as the real estate sector has boomed again

Economic pariah Iran has maintained a growth rate of 3 per cent, but is encumbered by a massive 47 per cent consumer price inflation rate. The country’s project market activity has nevertheless picked up, with $13bn of awards in the past 12 months – triple that of the previous year.

Algeria and Morocco have both maintained moderate levels of growth and single-digit inflation, but the projects
markets in both countries have also weakened significantly. 

While Algeria’s contract awards picked up in the past 12 months, to $4.3bn, this activity is still well below the long-term annual average of $7bn. The market shed $6.7bn in net value over the period in terms of active projects. 

Morocco’s projects market, meanwhile, fell away almost entirely, with just $797m in contract awards in the past 12 months, well below the $4.7bn-worth of awards in the 12 months prior.

Iraq rounds out the MEED Economic Activity Index with an estimated 2.7 per cent contraction in its economy in 2023 due to the Opec+ cuts. The country has largely maintained its projects activity, however, with $10.3bn-worth of awards over the past 12 months. 

About the index

MEED’s Economic Activity Index, first published in June 2020, combines macroeconomic, fiscal, social and risk factors, alongside data from regional projects tracker MEED Projects on the project landscape, to provide an indication of the near-term economic potential of Middle East and North African markets.

View the May 2023 index here
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John Bambridge

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