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UAE economic report: good, but can do even better

Equity markets and inflation require some extra effort

Shoppers at Dubai Mall. Relatively modest consumer inflation in the UAE has been offset by steep rises in housing costs Alamy via Reuters
Shoppers at Dubai Mall. Relatively modest consumer inflation in the UAE has been offset by steep rises in housing costs

Pupils at UAE schools are just getting their exam results. It is a tense time, especially for those (like my 15-year-old daughter) who will get to the business end of their school careers next term.

It is also, at the halfway point of the year as the UAE prepares to empty out for the dog days of summer, a useful time to give the national economy some marks for its performance over the past six months.

The UAE faced significant challenges from a volatile global economic and geopolitical environment in the first half of 2024. Here is how I would rate its response across key indicators.

Economic growth: 7/10

The IMF expects UAE GDP to grow by slightly more than the global average (3.2 percent), with a 3.5 percent rise pencilled in for 2024. Some forecasters predict rather higher than that, including the UAE Central Bank, which is going for 3.9 percent. 

The laggard is the oil sector which, because of the Opec+ production cuts still in force until the autumn, could lead to flat revenue or even a slight decline overall this year. As the Opec brakes are eased – assuming they are – GDP is set to jump in 2025.

Foreign direct investment: 8/10

This is where the UAE shines, especially in relation to other countries in the region struggling to meet ambitious targets for FDI. There is no official figure for the first six months of 2024, but in 2023 analytics company GlobalData ranked the Emirates as the third-largest magnet for FDI globally, after the US and Germany, pulling in $23 billion. 

The country’s image as a safe haven in a volatile geopolitical environment has been enhanced by its removal from the Financial Action Task Force “grey list” of countries censured for lax money-laundering policies.

Public debt: 8/10

UAE government borrowing is estimated by ratings agency Fitch at a modest 24 percent – way below the 100 percent-plus levels chalked up by some bigger economies in the West. The authorities have been actively paying this down over recent years.

The picture is more complicated when borrowings of government-related entities are included. The figure rises to 62 percent of GDP, but repayment schedules are well structured and achievable.

Inflation: 6/10

This is perhaps the most controversial area of the national economy. The Central Bank projects a 2.3 percent increase in consumer prices in 2024, but this masks big rises in real estate prices across the board, and especially in Dubai. 

Home values have surged by as much as 30 percent in the past year and rents have nearly doubled since the Covid-19 pandemic. 

Contrary to the UAE’s previous reputation as a “boom and bust” property market, most experts do not see real estate inflation reversing any time soon.

Equity markets: 6/10

The UAE has been a laggard in global terms for the first half of the year. The Dubai Financial Market is down just under 1 percent in that period, while Abu Dhabi’s ADX is off by nearly 6 percent. Compare this with the most commonly quoted indicator of global equity health, the S&P 500, which is up around 15 percent this year and reaching record highs.

However, it should be pointed out that UAE markets have been at record levels since the pandemic recovery, and there has been a highly successful string of initial public offerings in recent months.

Foreign trade: 8/10

This is again skewed by oil production cuts, but non-oil trade growth has been strong in recent years, hitting a record AED3.5 trillion ($953 billion) in 2023, according to the Central Bank. There is no reason to think it has fallen off in the first six months of the year.

Strong tourism and airport numbers, and healthy growth figures from ports group DP World, underline the UAE’s trading resilience in a shrinking global market.

So, that averages out to a score of just over 7/10 on the UAE report card. Easily enough to qualify for the top rank of global economies but, with a little attention to inflation and financial markets, it could look even better.

Frank Kane is Editor-at-Large of AGBI and an award-winning business journalist. He acts as a consultant to the Ministry of Energy of Saudi Arabia and is a media adviser to First Abu Dhabi Bank of the UAE

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