The UAE’s Non-oil Sector is expected to drive the country’s economic growth beyond the 6 percent mark in 2023, according to Minister of Economy Abdulla bin Touq Al-Marri.
The Non-oil Sector achieved a 4.5 percent growth in the first half of the year, contributing to an overall gross domestic product growth rate of 3.8 percent.
The UAE government is implementing a number of initiatives to support the non-oil sector, including:
- Expanding into new economic sectors, such as tourism, financial services, high-tech industries, and energy alternatives
- Launching innovative strategic initiatives to elevate these sectors
- Increasing productivity
- Encouraging innovation
- Reducing prices for consumers
- Improving the effectiveness of the economic system
The UAE achieved an all-time high of 1.13 trillion dirhams ($337.6 billion) in non-oil foreign trade during the first half of 2023. The UAE’s Non-oil business growth picked up in September on strong demand. The upturn in new work was supported by firms winning new clients both domestically and in export markets. The output subindex indicated continued strong expansion in activity, rising to 62.8 in September from 61.9 the previous month, on increased new orders, ongoing projects and new marketing.
The Global Economy 2023
The global economy is expected to experience a slow recovery in 2023, following the setbacks of the pandemic and, more recently, greater geopolitical tensions. This was reflected in the IMF’s decrease of global growth forecasts from 3.4% in 2022 to 2.8% in 2023 in the latest World Economic Outlook report (April 2023). The slowdown might be exacerbated by increased uncertainty in the financial system that could lead to abrupt reductions in lending and consumer expenditure. In parallel, the ongoing tightening of monetary policy by most central banks should meet its intended objective, with inflation returning to its targeted levels over the medium term.
The financial sector was put on edge by the intensification of monetary policy tightening worldwide, leading to the failure of three regional banks in the United States and one large bank in Switzerland. While these events sparked uncertainty in financial markets, policymakers acted swiftly and firmly to contain the repercussions. In March 2023, the Adjusted National Financial Conditions Index (ANFCI) in the United States remained negative, indicating that financial conditions are still looser than what economic conditions suggest. Globally, financial conditions appear broadly neutral.
After growing at 9.5% in 2022
with an average production of 3.1 million barrels per day, oil GDP growth in Q1 2023 is estimated to have moderated to 3.1% Y-o-Y, in line with the OPEC+ agreements. Starting in May 2023, OPEC decided to cut production by 144 thousand barrels per day for the UAE. This resulted in a downward revision of the expected GDP growth for 2023 to -0.3%, corresponding to an average daily output of 2,950 thousand barrels per day. The CBUAE projects the other hydrocarbon products, such as natural gas liquids (NGL), that are not covered by the OPEC+ production agreements but contribute to oil GDP, to continue to grow at a strong pace in 2023.
Oil GDP growth is forecasted to rebound to 3.5% in 2024. Performance in 2023 and 2024 is subject to the evolution of the conflict in Ukraine, a faster than expected deceleration in global growth, further OPEC+ cuts or increases in oil production, and subdued production of other OPEC+ members.
Non-Oil GDP After expanding by 7.2% in 2022, the non-oil sector is estimated to have grown at slightly lower pace in Q1 2023. Despite the weaker performance in the first quarter of the year, the CBUAE revised its non-oil GDP growth upwards for 2023 to 4.5%, mainly due to an acceleration of private and public investment in the remainder of the year. Travel and tourism are expected to further accelerate, consistent with the results of some of the major industry market players. For 2024, the CBUAE projects the real non-oil GDP to expand by 4.6%, in line with global growth trends.
Conclusion
The UAE’s economy is expected to continue to grow in 2023 and beyond, driven by the non-oil sector. The government is implementing a number of initiatives to support the non-oil sector, and the global economy is expected to experience a slow recovery.