The UAE’s economic growth is expected to have doubled in 2022, the country’s central bank said in a report on Wednesday.
“The UAE's gross domestic product (GDP) is expected to have grown by nearly 7.6 per cent in 2022, supported by significant activity across all sectors, and is among the highest globally,” the regulator said in its 2022 Annual Report. The UAE’s real GDP growth in 2021 was 3.9 per cent, data showed.
This happened even as advanced economies experienced a decline in economic activity in the past year.
“Advanced economies experienced a broad-based decline in economic activity during 2022, with growth dropping to 2.7 per cent in 2022 from 5.4 per cent in 2021, reflecting tighter monetary stances,” CBUAE said, warning that global growth is projected to bottom out at 1.2 per cent for the year.
The GCC region overall, too, fared better than other economies. The block saw a real GDP growth of 5.3 per cent in 2022, which is likely to slow to 3.2 per cent this year.
The Central Bank was optimistic that in 2023 inflation in the GCC region is expected to ease on the back of global growth challenges and declining international energy prices.
2023-24 UAE outlook
The Central Bank projects UAE’s real output growth to slow to 3.9 per cent in 2023, largely reflecting a decline in oil production partially offset by the strong performance of the non-oil sector. Growth is projected to increase to 4.3 per cent in 2024, owing to a better performance in both the oil and non-oil sectors.
Oil and non-oil GDP
The oil sector is expected to have rebounded strongly in 2022 from almost zero growth in 2021, the central bank said. The estimated 10.1 per cent growth in 2022 reflects a rising trend during the year, albeit slightly declining in the last quarter due to the November 2022 OPEC+ agreement to cut production by two million barrels per day.
The 2022 average oil production reached as high as 3.1 million barrels per day, in line with OPEC+ agreements, from an average of 2.7 million barrels per day in 2021. Real oil GDP is projected to grow by 3 per cent and 3.5 per cent in 2023 and 2024, respectively. The uncertainty surrounding these projections is high, as they depend on the evolution of the Russia-Ukraine conflict, the heightened risk of a global slowdown, and the possibility of further OPEC+ cuts to oil production.
Meanwhile, non-oil GDP growth is estimated to have accelerated to 6.6 per cent in 2022 from 5.8 per cent in 2021. The strong performance reflects a variety of factors, including the removal of most COVID-19-related restrictions and resulting recovery in global travel and tourism, the real estate and construction sectors, expanding manufacturing activity, and increased activity associated with events such as the Dubai Expo and FIFA World Cup in Qatar. For 2023 and 2024, CBUAE projects real non-oil GDP growth to slow to 4.2 per cent and then accelerate to 4.6 per cent, respectively, in line with global growth trends.
Strong banking sector
In 2022, the UAE banking sector recorded a 10.5 per cent growth in total assets, reaching Dh3,670 billion. The sector exhibited resilience during the pandemic, supported by broad-based measures by the CBUAE. The Targeted Economic Support Scheme (TESS) was wound down in 2022 as the sector and economy recovered from the pandemic’s repercussions.
The UAE banking system in 2022 consisted of 61 licensed banks, including two digital banks. The number of physical bank branches decreased by 22.3 per cent in the past three years, driven by the digitalisation of financial services.
Real estate accounted for 8.2 per cent of non-oil GDP, data showed. Despite the increase in interest rates, the UAE’s real estate sector displayed a strong performance. At the emirate level, residential property sale prices in Abu Dhabi increased on average by 2.1 per cent in 2022, compared to 1.7 per cent in 2021, while rents increased by 0.1 per cent over the same period compared to a 4.2 per cent decline in 2021. The implied rental yield declined on average by 2 per cent year-on-year in 2022. The performance of the Dubai property market in 2022 was exceptional, reflecting its attractiveness worldwide. 2022 was in fact the best-performing year in Dubai's history, with residential property prices surging by 21.9 per cent, and rents increasing by 3.2 per cent.
The UAE headline average inflation rate reached 4.8 per cent in 2022. The consumer price index in the country continued to rise during 2022, in line with global trends, but remained far below the world average of 8.8 per cent. Prices during 2022 were affected by geopolitical developments taking place in several regions of the world, which put pressure on supply chains, driving up international commodity prices, particularly oil, raw materials and food prices.
The largest price increases took place in transportation (23 per cent), food and beverages (7.2 per cent), recreation, sports and culture (13.1 per cent), and restaurants and accommodation services (7.2 per cent). Data at the emirate-level indicate CPI inflation in Abu Dhabi and Dubai increased by 5.6 per cent and 4.7 per cent, respectively, the Central bank said.
In 2023, inflation is projected to decelerate to 3.2 per cent due to softer price increases in all categories, especially transport, and food and beverages. Imported inflation is expected to be modest, owing to the disinflation trend worldwide, while rents and wages are also expected to contribute moderately. In 2024, inflation is projected to slow further to 2.8 per cent.