Economists predict that the UAE will continue to lead as the fastest-growing economy within the Gulf Cooperation Council (GCC) for 2024 and 2025, due to its ability to increase oil production ahead of other Opec+ nations. James Swanston, an economist at Capital Economics, forecasts that the UAE's GDP will expand by 3.3% this year and by 5.5% in 2025, outperforming its regional counterparts. Swanston noted that the UAE's robust financial position and the ability to maintain loose fiscal policies despite lower oil prices will enable it to sustain its economic growth leadership in the Gulf region. The World Bank also anticipates a growth of 3.9% in 2024 and 4.1% in 2025 for the UAE. Recently, Opec+ extended its oil output cuts into the next year, but the UAE is set to begin reducing its voluntary cuts from October and will benefit from an increased production quota starting January, leading to a 6% increase in oil output by 2025 compared to previous estimates. Capital Economics expects Brent crude prices to average $83 per barrel this year and $75 per barrel in 2025, which are comfortably above the UAE's fiscal and current account break-even prices. This favorable scenario allows the UAE to maintain a loose fiscal policy, supported by substantial surpluses. Ole Hansen from Saxo Bank highlighted differing outlooks from Opec and the International Energy Agency (IEA) regarding demand growth for 2024 and 2025, with Opec maintaining a more optimistic view. The recovery in Gulf GDP growth is expected to be driven by rising oil output, although the impact might be delayed due to Opec+'s decision to keep output low until October. Capital Economics predicts that non-oil sectors in the Gulf will continue to grow strongly, supported by a potential monetary loosening cycle and a decrease in inflation, which should ease pressure on real incomes and support consumer spending.
Text: Lara Palmer
19.06.2024
Forecasted Oil Output Increases to Boost UAE's GDP, Outpacing Regional Peers