22 May 2024
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UAE GDP grew 3.6% in 2023

Non-oil growth was higher than forecast at 6.2%

By Khatija Haque

The UAE’s economy grew 3.6% in 2023, exactly in line with our forecast, according to preliminary data. The non-oil sector grew by a faster than expected 6.2% last year, while the oil and gas sector contracted by -3.1%.

Financial services was the fastest growing sector in 2023, expanding 14.3% y/y after 6.6% growth in 2022. This was followed by transport and logistics (11.5% y/y), construction and real estate services.

UAE key sector growth rates (2023)

Source: FCSA, Emirates NBD Research

Emirate level data show that Abu Dhabi’s non-oil GDP grew 9.1% in 2023, only fractionally slower than the 9.2% growth recorded in 2022. The key sector growth rates for Abu Dhabi were similar to the UAE, although wholesale & retail trade grew at a robust 7.9% in Abu Dhabi last year, compared with 3.9% growth at a national level. With around half of Abu Dhabi’s GDP coming from hydrocarbons, the -3.1% contraction in oil & gas GDP last year meant that headline GDP growth for Abu Dhabi slowed to 3.1% in 2023 from 9.2% in 2022.

Abu Dhabi key sector growth rates (2023)

Source: Haver Analytics, Emirates NBD Research

For Dubai, only Q1-Q3 data is available as of this writing, and the figures show 3.3% growth in Dubai’s GDP last year, with transport, logistics and hospitality driving the emirate’s economy in 2023, followed by information & communication (ICT) and real estate services. Manufacturing and wholesale & retail trade both grew at a slower pace in Dubai than at the national level.

Dubai key sector growth rates (Q1-Q3 2023)

Source: Haver Analytics, Emirates NBD Research

The UAE’s economy has been remarkably resilient to both a lacklustre external backdrop as well as significantly higher interest rates in 2023. We now expect only a modest easing in monetary policy from the Fed towards the end of this year, with a total of 50bp in rate cuts pencilled in between September and December. This is likely to weigh on private sector investment this year. However, we expect public sector investment – particularly in transport and other infrastructure – to remain robust in 2024 and beyond, as the government has announced several large long-term projects including the expansion of the Etihad Rail network and Al Maktoum Airport. This will continue to underpin non-oil GDP growth in our view, offsetting any moderation in private sector investment and household consumption.

Consequently, we have upgraded our non-oil growth forecast for the UAE this year to 5.0% from 4.5% previously, taking headline GDP growth to 3.7% from 3.3% previously. We assume no growth in the oil & gas sector this year as oil production is likely to remain constrained by OPEC+ production limits. If there is an increase in the UAE’s target production level, this would pose an upside risk to our headline GDP growth forecast.


Written By

Khatija Haque Head of Research & Chief Economist

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