UAE economy steers clear of global woes
24 April 2023
Related reads on the UAE:
> Two billion riders use Dubai Metro
> Surge in tourists boosts Dubai hospitality
> Abu Dhabi strengthens its position at home
> UAE calls for reform of international financial institutions
> UAE president appoints son as Abu Dhabi crown prince
> UAE and Israel sign customs cooperation deal
> UAE moves ahead with digital currency
The UAE economy is expected to maintain a course of robust economic growth in 2023, avoiding the effects of the creeping global economic slowdown.
The Washington-based IMF projects a growth rate of 3.5 per cent for the country in 2023 – a rate of expansion well clear of the 2.8 per cent global average amid what has become a worldwide slowdown. The forecast is also ahead of the projected 3.1 per cent growth rate for the Middle East and North Africa.
Though a step down from the 7.4 per cent growth in 2022, and a modest downgrade of 0.7 per cent from the projection in October of a growth rate of 4.2 per cent this year, the UAE’s economic activity remains firmly buoyant. Its growth is forecast to rise again to 3.9 per cent in 2024.
The minor slowdown in the UAE’s economic growth is primarily due to Opec+ cutting oil production quotas, which is reversing some of the past year’s increases in oil production across the region. However, despite the cuts and the weakening of oil prices, the UAE’s oil sector revenues are expected to remain healthy, maintaining a government budget surplus of approximately 3.7 per cent of GDP this year.
Inflationary pressures have also eased since the peak of last year. Disinflation is expected to continue in the coming months, reaching 2.1 per cent this year, down from 4.8 per cent in 2022.
In light of such considerations, the Central Bank of the UAE has also put out a more optimistic projection of a sustained GDP growth rate of 3.9 per cent in 2023.
More positive still is Issam Abu Suleiman, regional director for the GCC at the World Bank, who has forecast that the UAE economy will continue to grow by 4.1 per cent despite the challenging global economic conditions.
More limited projections also exist, including a report by the Institute of Chartered Accountants in England & Wales and Oxford Economics that estimates that the growth will slow to 3.2 per cent in 2023, as weaker oil growth weighs on the more buoyant 3.9 per cent growth in the non-oil sector.
Positive sentiment
For businesses on the ground, the projection of close to 4 per cent non-oil growth remains cause for optimism.
This has been reflected in the S&P UAE Purchasing Manager’s Index (PMI), which rose yet higher from 54.3 in February to 55.9 in March (with a value over 50 indicating growth).
S&P’s report noted a pick-up in new order growth to a five-month high, as well as a rise in capacity pressures that has seen the fastest increase in employment since July 2016. The construction sector was particularly active in hiring amid a slew of new project launches led by off-plan real estate schemes.
The UAE aims to double the size of its economy by 2031 as it continues to diversify away from oil and gas
The UAE’s rebounding real estate market is more generally a key driver of the country’s sustained non-oil growth. House prices are on the rise in Abu Dhabi and property sales in Dubai have hit decade highs in recent months.
Tourism is also recovering, with Dubai regaining its spot as one of the world’s busiest aviation hubs. International visitors are forecast to increase by 20 per cent in 2023.
Ipsos’ Primary Consumer Sentiment Index ranked the UAE second in the world in terms of consumer perceptions of the strength of the economy, with 63 per cent of respondents believing it to have a strong economy. Of those polled, 81 per cent also reported being comfortable with investing in the future and 86 per cent expecting the local economy to be stronger in the next six months.
Ratings agency Moody’s has also reaffirmed the UAE’s long-term local and foreign currency issuer ratings at Aa2 with a stable outlook, citing exceptionally low credit risk with its well-balanced budget targets and limited federal spending requirements.
The introduction of corporate income tax, effective 1 June 2023, will result in further government revenue growth starting from 2025.
Moody’s also pointed to the UAE’s ongoing economic diversification. The country’s progress to date in this area remains well ahead of its GCC peers in terms of the expansion of its non-hydrocarbons revenue, private sector development and overall international attractiveness to foreign businesses and talent.
Future outlook
Looking ahead, the UAE aims to double the size of its economy by 2031 as it continues to diversify away from oil and gas. To achieve this, it needs an average of 7 per cent GDP growth a year, which it hopes to achieve by forging trade agreements and investing in global growth sectors such as green hydrogen.
The UAE’s foreign trade rose by 17 per cent year-on-year to reach AED2.2tn ($599.1bn) in 2022. In the decades ahead, the country aims to attract AED550bn in foreign direct investment by 2031 and AED1tn by 2051.
Abdullah bin Touq al-Marri, the UAE’s minister of economy, has noted that the UAE’s active business environment, which is supported by both national and foreign private sectors and an attractive labour market for international talent, has contributed to the growth of the economy.
By 2030, the government aims to increase the number of small and medium-sized enterprises (SMEs) to 1 million and raise the contribution of SMEs to the country’s non-oil GDP to 63.5 per cent.
In January this year, Dubai also launched its D33 economic agenda, which aims to grow the emirate’s economy to AED32tn by 2033 through a combination of transformative projects and a doubling of foreign trade to AED25.6tn by expanding trade links with Africa, Latin America and Southeast Asia.
This month's special report on the UAE includes:
> GOVERNMENT: Abu Dhabi strengthens its position at home
> ECONOMY: UAE economy steers clear of global woes
> BANKING: UAE lenders chart a route to growth
> UPSTREAM: Strategic Adnoc projects register notable progress
> DOWNSTREAM: Gas takes centre stage in Adnoc downstream expansion
> POWER: UAE power sector shapes up ahead of Cop28
> WATER: UAE begins massive reverse osmosis buildup
> CONSTRUCTION: Dubai construction needs major project launches
Exclusive from Meed
-
Oman 500MW solar project secures financing
8 December 2023
-
Masdar and OMV sign green hydrogen agreement
8 December 2023
-
Sheikh Mohammed inaugurates Dubai CSP plant
7 December 2023
-
Firms win Saudi Landbridge
7 December 2023
-
Siemens Energy wins five Iraq substation contracts
6 December 2023
All of this is only 1% of what MEED.com has to offer
Subscribe now and unlock all the 153,671 articles on MEED.com
- All the latest news, data, and market intelligence across MENA at your fingerprints
- First-hand updates and inside information on projects, clients and competitors that matter to you
- 20 years' archive of information, data, and news for you to access at your convenience
- Strategize to succeed and minimise risks with timely analysis of current and future market trends

Related Articles
-
Oman 500MW solar project secures financing
8 December 2023
Oman's Manah 1 solar photovoltaic (PV) independent power producer (IPP) project has signed financing deals worth $302m with France's Societe Generale, the Export-Import Bank of Korea (Korea Eximbank) and Bank Muscat.
The Manah 1 IPP developers and investors, comprising Korea Western Power Company (Kowepo) and France's EDF Renewables, signed the deal on 6 December.
According to a local media report citing a Kowepo statement, the Korea Eximbank plans to provide $170m in project financing.
A team comprising EDF Renewables and Kowepo started mobilising to construct the 500MW Manah 1 solar IPP project in Oman, as MEED reported in September.
The solar power plant will span over 7.8 square kilometres in Oman’s Al-Dakhiliyah governorate.
The developer intends to deploy over 1 million bifacial photovoltaic (PV) modules mounted on a single-axis tracker system for the plant.
A project company, Wadi Noor Solar Power Company, has been formed to deliver and operate the project for 20 years.
The company will work with Australia-headquartered Worley, which has recently been appointed as the owner engineer for the project.
Oman Power & Water Procurement Company (OPWP) signed the 20-year power-purchase agreements (PPA) for the Manah 1 and Manah 2 solar IPP projects in March this year.
Both plants are expected to be operational by 2025.
A team of Singapore’s Sembcorp Industries (Sembcorp) and China-headquartered Jinko Power Technology was awarded the 500MW Manah 2 solar PV IPP contract.
Manah 1 and 2 were previously named Solar IPP 2022 and 2023.
To be located 150 kilometres southwest of Muscat, the Manah 1 and 2 solar projects comprise the second utility-scale renewable energy projects to be tendered by OPWP, after Ibri 2, which has been operational since 2021.
https://image.digitalinsightresearch.in/uploads/NewsArticle/11358677/main.jpg -
Masdar and OMV sign green hydrogen agreement
8 December 2023
Abu Dhabi Future Energy Company (Masdar) and Austrian energy and chemicals firm OMV have signed a preliminary agreement to partner in the production of green hydrogen for the decarbonisation of industrial processes in OMV’s refineries.
The non-binding heads of terms (HoT) agreement forms the basis of a joint agreement to develop an industrial large-scale electrolysis plant, which will be powered by renewable energy, Masdar said in a statement on 8 December.
The statement added that the partners will collaborate to develop the project and plan to make a final investment decision in the second half of 2024.
The HoT signing follows an initial memorandum of understanding (MoU), which the two parties signed in Abu Dhabi earlier this year.
The agreement with OMV is a step in the right direction towards building a robust hydrogen value chain and supports Masdar's ongoing aim of 1 million tonnes of green hydrogen per annum globally by 2030, according to Masdar's chief green hydrogen officer, Mohammad Abdelqader el-Ramahi.
Green hydrogen oasis
According to MEED data, there are at least 12 known and planned green hydrogen projects in the UAE, with a budget of at least $12bn.
In addition to the planned $5bn green hydrogen hub planned by Masdar and French utility developer and investor Engie, the other major planned green hydrogen projects in Abu Dhabi involve its largest industrial firms, including Abu Dhabi National Energy Company (Taqa), Emirates Steel, Fertiglobe and Brooge.
One of these projects, the 150MW green hydrogen-based ammonia production facility planned in Ruwais, is expected to reach a financial investment decision (FID) shortly.
The UAE's Green Hydrogen Strategy envisages the production of 1.4 million tonnes a year (t/y) of hydrogen by 2031, with green hydrogen accounting for 70 per cent of the target.
This is expected to increase to 7.5 million t/y by 2040 and 15 million t/y by 2050.
https://image.digitalinsightresearch.in/uploads/NewsArticle/11358471/main.jpg -
Sheikh Mohammed inaugurates Dubai CSP plant
7 December 2023
Sheikh Mohammed bin Rashid al-Maktoum, UAE Vice President and Prime Minister and Ruler of Dubai, has inaugurated the fourth phase of the Mohammed bin Rashid al-Maktoum (MBR) Solar Park in Dubai.
The 950MW fourth phase of the MBR solar park required an investment of AED15.78bn ($4.34bn).
It uses hybrid technologies: 600MW from a parabolic basin complex, 100MW from the CSP tower, and 250MW from solar photovoltaic (PV) panels.
The independent power producer (IPP) project features the tallest solar tower in the world, at 263.126 metres, and a thermal energy storage facility with a capacity of 5,907 megawatt-hours (MWh), the world's largest according to the Guinness World Records.
The project covers an area of 44 square kilometres. It features 70,000 heliostats that track the sun’s movement. The molten salt receiver (MSR) on top of the solar power tower is the core and the most important part of the CSP plant. It receives solar radiation and turns it into thermal energy.
The MSR contains over 1,000 thin tubes that enable the absorption of sun rays and their transfer to the molten salt within these tubes.
The project can power approximately 320,000 residences with clean and sustainable energy. It will reduce carbon emissions by about 1.6 million tonnes annually.
The completion of the project's fourth phase brings the total capacity of the MBR solar park to 2,863MW so far. The phases and their capacities are:
- 13MW solar PV phase one: Completed in 2013
- 200MW solar PV phase two: Commissioned in 2017
- 800MW solar PV phase three: Commissioned in 2020
- 950MW hybrid CSP/solar PV phase four: Inaugurated in 2023
- 900MW solar PV phase five: Commissioned in 2023
Dewa is aiming for the MBR development to reach 5,000MW of capacity by 2030. It recently awarded the UAE-based Masdar the contract to develop the solar park's sixth phase, which has capacity of 1,800MW.
Project background
Dubai Electricity & Water Authority (Dewa) awarded a consortium of Saudi Arabia’s Acwa Power and China's Silk Road Fund the contract to develop a 700MW CSP plant with storage for the fourth phase scheme in November 2017. Since then, the project has been expanded to include a 250MW solar PV component.
Acwa Power then awarded Shanghai Electric the $3.8bn EPC contract for the hybrid CSP/PV plant in early 2018.
The project reached financial closure in March 2019. The cost will be met through $2.9bn of debt and $1.5bn of equity.
According to the project structure, Dewa is to provide $750m, or half of the project equity. Project developers Acwa Power and the Silk Road Fund will provide 51 per cent and 49 per cent, respectively, of the remaining equity.
The fourth phase project achieved a tariff of 7.3 $cents a kilowatt hour ($c/kWh) for the CSP component and 2.4$c/kWh for the PV capacity, two of the lowest tariffs for CSP and PV solar technology in the world at the time of award.
Dewa holds a 51 per cent stake in the project company, Noor Energy 1, set up to develop the plant, with Acwa Power and the Silk Road Fund holding the remaining stake. The developer consortium has signed a 35-year power-purchase agreement to supply power to Dubai’s grid.
Photo: Wam
https://image.digitalinsightresearch.in/uploads/NewsArticle/11354147/main.jpg -
Firms win Saudi Landbridge
7 December 2023
Register for MEED’s guest programme
The team of US-based Hill International, Italy’s Italferr and Spain’s Sener has been awarded the contract to provide project management services for the estimated $7bn Saudi Landbridge project.
The Landbridge is a rail project that will connect the Red Sea coast of Saudi Arabia in the west and the Gulf coast in the east. It is one of the largest infrastructure projects planned in Saudi Arabia. The scheme is being implemented by the Saudi Railway Company (SAR).
Project scope
The project comprises six lines. The first line involves upgrading the Jubail Industrial City internal network, which is currently under construction. It will require 10 kilometres (km) of track to be built.
The second is the upgrade of the Jubail to Dammam railway line, which is also currently under construction. It will require 35km of track to be built.
The third line involves the upgrade of the Dammam to Riyadh railway line, with 87km of track to be built.
The fourth line, known as the Riyadh bypass, is from the existing network in the north of the city to the south. It is split into two packages: the first has 67km of track, and the second has 35km.
The fifth line is a link from Riyadh to Jeddah and then on to King Abdullah Port with three stations at Jamuma, Moya and Al-Doadmi. The Riyadh to Jeddah line will have 920km of track, and the Jeddah to King Abdullah Port link will have 146km of track.
The sixth line is a new 172km line from King Abdullah Port to Yanbu Industrial City.
There will also be seven logistics centres: Jubail Industrial City Logistics Centre, Damman Logistics Dry Port, a relocated Riyadh Dry Port, King Khalid Airport Logistics Centre in Riyadh, Jeddah Logistics Dry Port, King Abdullah Port Logistics Centre and Yanbu Industrial City Logistics Centre.
Contractor negotiations
MEED reported in November that negotiations with the Saudi China Landbridge Consortium that will build the rail link are in the final stages.
The consortium signed a memorandum of understanding to implement the project on a public-private partnership basis in October 2018. It was formed by SAR and China Civil Engineering Construction Company.
Al-Ayuni Contracting was named as the local partner for the consortium. Other members include French firms Systra and Thales; Canada’s WSP; Aldhabaan & Partners, the local partner of UK legal consultancy Eversheds & Sutherland; ALG Infrastructure; and Calx Consultancy.
https://image.digitalinsightresearch.in/uploads/NewsArticle/11354086/main.jpg -
Siemens Energy wins five Iraq substation contracts
6 December 2023
Register for MEED's guest programme
Iraq's Electricity Ministry has awarded Germany-headquartered Siemens Energy a contract to deliver five high-voltage substations on a turnkey basis in Iraq.
The 400-kilovolt (kV) substations will be installed in Baghdad, Diyala, Najaf, Karbala and Basra.
Each substation will have a capacity of 1,500MW. Work on the substation projects is expected to commence in early 2024.
German export credit agency Allianz Trade Trust, formerly Euler Hermes, will provide most of the project financing in collaboration with Iraq's Finance Ministry.
MEED understands the substations address the increasing demand for power transmission in Iraq, providing power to around 2.5 million homes.
On 5 December, a consortium led by K&K Group, which includes Siemens Energy, announced that it is moving ahead with a detailed study for an electricity corridor, known as Green Vein, whose initial stage will have the capacity to transmit up to 3GW of clean electricity from Egypt to Italy.
Italian companies Cesi and Prysmian Group comprise the rest of the consortium planning to develop the Green Vein project.
It entails the installation of a submarine high-voltage, direct current (HVDC) cable, which extends approximately 2,800 kilometres and reaches sea depths of up to 3,000 metres.
The cable will connect the West Sohag area in Egypt to the Dolo substation near the Mestre Industrial Area in Italy.
The project's initial capacity of 3GW equates to approximately 5 per cent of Italy's peak electricity demand.
Image: Pixabay
https://image.digitalinsightresearch.in/uploads/NewsArticle/11352608/main.jpg