10 September 2024
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UAE non-oil GDP growth slows to 4.0% y/y in Q1 2024

By Khatija Haque

The UAE economy grew 3.4% y/y in Q1 2024 according to preliminary estimates, slower than the 3.9% growth recorded in Q1 2023 and also weaker than Q4 2024 growth of 4.3%. Non-oil GDP grew 4.0% y/y in Q1 (6.7% in Q4 2023), which implies a modest 1.6% expansion in the oil and gas sector in the first quarter. The restraint in hydrocarbon output means that the non-oil sectors accounted for more than 75% of total real GDP in Q1 2024, the highest on record.

While the full data set has not yet been released, the official press statement indicated that the fastest growing sector in the first quarter of this year was financial services (7.9% y/y) followed by transport and storage (7.3% y/y) and construction (6.2% y/y). Wholesale and retail trade remained the largest non-oil sector of the economy at just over 12% of GDP but grew just 2.5% y/y in Q1. Real estate services output also slowed to 2.0% y/y in Q1. We expect non-oil GDP growth to slow to 5.0% in 2024 from 6.2% in 2023.

Former ECB President Mario Draghi yesterday released a report calling for the EU to invest EUR 800bn per year and commit to issuing common bonds in order to restore EU competitiveness and boost growth. Other recommendations in the report included reducing the regulatory burden, facilitating cross border innovation, and moving to a full capital market and banking union. The main proposal to issue joint EU debt was immediately opposed by Germany, and closer integration on other fronts is unlikely to find favour in many EU countries where anti-EU sentiment has increased.

Key economic data and events today

10:00 Germany CPI (Aug) forecast 1.9% y/y

10:00 UK unemployment (Jul) forecast 4.1%

Fixed Income

  • US treasury yields were mixed yesterday with the 2y yield rising +2bp to 3.67% while the 10y yield declined -1bp to 3.70%. Benchmark bond yields were mixed across Europe as well with France, Portugal, Netherlands and Switzerland all seeing 10y yields rise slightly while gilt and bund yields declined.
  • Qatar Islamic Bank has mandated banks for a USD benchmark 5y sukuk. Separately, Moody’s Ratings expects total sukuk issuance globally will exceed 2023’s levels this year, reaching USD 200-210bn.

FX

  • The US dollar index rallied 0.4% yesterday with all major currencies losing ground against the greenback, except for CAD. JPY weakened 1% to 143.67/USD, CHF lost 0.7% to 0.8489 while GBP and EUR depreciated 0.4% respectively.

Equities

  • US equities started the week on a firmer note after Friday’s selloff with the major US indices all gaining more than 1%. Nasdaq100 was the biggest mover up 1.3% on Monday. In Europe the Eurostoxx50 index rose 0.9% while the FTSE100 rose 1.1%.
  • GCC equity markets closed lower on Monday with the ADXGI leading the decline at -1%. The DFMGI lost -0.3% while the Saudi TASI was slightly lower at -0.2%.

Commodities

  • Oil prices recovered on Monday with Brent up 1.1% to USD 71.84/b and WTI up 1.5% to USD 68.71/b. While oil benefitted from improved market sentiment, tropical storm Francine in the Gulf of Mexico caused an evacuation of drilling crews as it is now expected to reach Louisiana as a category 2 hurricane. Both benchmarks are trading firmer in Asian markets this morning as well.

Written By

Khatija Haque Head of Research & Chief Economist


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