The ever-evolving landscape of economic dynamics, the United Arab Emirates (UAE) and the Gulf Cooperation Council (GCC) are poised for a remarkable journey in 2024, with a twist in the tale—non-oil sectors taking the driver’s seat as traditional crude demand takes a back seat.
Khatija Haque, the insightful chief economist and head of research at Emirates NBD, paints a vivid picture of this paradigm shift. According to her, the non-oil sector emerged as the hero of the first half of 2023, notching up an impressive 5.9 percent growth for the entire UAE. Delving deeper into the narrative, Abu Dhabi stole the spotlight with a staggering 9.2 percent growth in its non-oil sectors, outpacing Dubai’s respectable 3.2 percent in the same period.
As the curtains rise on the economic stage in 2024, Haque anticipates a continuation of this trend, forecasting a slightly tempered non-oil growth at 4.5 percent. This moderation is attributed to the global economic scenario, where growth is expected to slow to 2.9 percent from the 3.0 percent recorded in 2023. Haque attributes this deceleration to the persistently tight monetary policies, especially in the initial half of the year, impacting both demand and investment.
Despite the headwinds, the chief economist remains optimistic about the UAE and GCC’s prospects, citing ongoing structural reforms aimed at enhancing the business environment and luring investments. These reforms are poised to be the bedrock of aggregate demand, albeit at a pace marginally slower than the economic sprint witnessed in 2023.
However, the looming shadow of the oil market cannot be ignored. Haque predicts that oil GDP growth in the GCC will act as a drag on the overall GDP growth in 2024, aligning with the World Bank’s forecast of a global economic slowdown to 2.4 percent. The uncertainty in the geopolitical sphere adds an extra layer of complexity to the economic forecast, introducing potential near-term hazards to the landscape.
Yet, in the face of these challenges, Haque stands firm on the strength of non-oil sectors, projecting a robust average growth of 3.6 percent across the GCC in 2024. This resilience, she argues, will be fueled by continued investments as oil-exporting nations forge ahead with ambitious economic diversification programs.
In a refreshing departure from conventional expectations, Haque dispels concerns about government expenditure taking a nosedive. Contrary to fears of spending cuts or fiscal policy tightening, she envisions a more measured growth in government expenditure for 2024.
Zooming in on the non-oil sectors that are set to redefine the economic landscape, the stars of the show include travel and tourism, real estate, aviation, and trade. These sectors have witnessed an unprecedented surge in growth in the post-pandemic era, spearheading the recovery after the economic slump of 2020.
As the stage is set for 2024, the narrative unfolds with a promise of economic resilience, diversification, and a newfound reliance on non-oil sectors to steer the UAE and GCC towards a future defined by innovation and sustainable growth. The spotlight is on the unconventional heroes, and the audience eagerly awaits their stellar performance on the global economic stage.