The Central Bank forecasts a growth rate of 5.2% by 2025
[ad_1]
The UAE Central Bank expects the economy to grow 5.2 percent in 2025, but adjusted its forecast for 2024.
Its report for the latter part of 2023 suggests the economy will grow even faster next year, especially due to stronger growth in the oil sector. In 2025, the oil sector is expected to grow by 6.2 percent, while the non-oil sector will likely grow by 4.7 percent.
In its fourth quarter 2023 report, the Central Bank revised its projection for 2024, expecting real output growth to reach 4.2 percent, down from the previous estimate of 5.7 percent. This adjustment is attributed to a slower recovery in oil production following the OPEC+ agreement in November 2023, along with strong but declining growth in the non-oil sector. However, in December 2023, the Central Bank increased its GDP growth forecast for the UAE in 2024 to 5.7 per cent, up from 4.3 per cent, driven by 8.1 per cent growth in the Oil GDP. GDP growth estimates for 2023 were unchanged at 3.1 percent in the fourth quarter 2023 report, mainly due to the extension of oil production cuts until the end of 2023.
The regulator warned that forecasts for 2024 and 2025 were uncertain, citing possible downside risks arising from geopolitical tensions in the Red Sea, conflicts in Gaza, the war between Russia and Ukraine, a global economic slowdown due to interest rates higher and longer cuts, and the potential for additional OPEC+ agreed reductions in oil production. However, it also flagged potential upside risks, such as the successful implementation of reforms and falling interest rates in advanced economies, which could boost external demand and stimulate capital flows in emerging markets.
Oil production
Under the OPEC+ agreements of November 2023 and March 2024, oil production is expected to remain low. However, starting in the fourth quarter of 2024, oil production is expected to resume under the group’s agreement from June 2023. Consequently, oil GDP growth is expected to rebound to 2.9 percent. percent in 2024, up from the previous projection of 8.1 percent, averaging 3 million barrels per day. In 2025, the Central Bank predicts a further expansion in hydrocarbon production of 6.2 percent, maintaining the production levels of the fourth quarter of 2024 throughout the year.
The regulator expects inflation to rise to 2.5 percent this year, driven mainly by rising prices of raw materials such as oil, wheat and corn, along with the expected depreciation of the US dollar. Despite this acceleration, inflation in the UAE remains notably lower than the global average. Capital Economics notes that the UAE has some of the lowest fiscal and external oil prices in the region. Even if oil prices decline, the UAE is expected to maintain twin surpluses, allowing for loose fiscal policy. Additionally, strong non-oil activity and a recovery in the real estate sector have eased concerns about corporate debt in Dubai.
News Source: Khaleej Times
[ad_2]
