Stock Abu Dhabi skyline city UAE
Higher oil will help Gulf states to wipe out fiscal deficits and end the year in surplus territory. Image Credit: AFP

Dubai: GDP growth for the UAE economy could hit 6.3 per cent in real terms to $483. 4 billion this year, according to Institute of International Finance (IIF), higher than the IMF and UAE Central Bank forecast of 4.2 per cent.

Abu Dhabi’s real GDP could reach 7.6 per cent in 2022 driven by the substantial increase in oil and gas production and prices. Dubai’s growth is forecast to remain robust at 4.2 per cent, driven by its core sectors such as trade, retail, and tourism.

With average oil prices at $101 per barrel in 2022, the combined current account surplus of regional oil exporters is poised to surge from $159 billion in 2021 to $445 billion, with the six GCC countries accounting for 84 per cent of the surplus. This in turn will feed into Saudi Arabia’s GDP numbers, projected to grow 7.3 per cent to $835.9 billion. Kuwait’s is pegged at 6.6 per cent to $169 billion.

The IIF expects fiscal breakeven oil prices in state budgets to continue to decline due to the further increases in non-oil revenues and strong recovery in the volume of oil exports. “The surge in oil and gas prices will eliminate last year’s aggregate fiscal deficit and shift it to a surplus of 5 per cent of GDP in 2022,” said Garbis Iradian, Chief Economist Mena, IIF.

Inflationary pressures remain relatively modest, particularly in the GCC, aided by pegged exchange rates, which appreciated vis-à-vis most trading partners. Also, the pass through of higher global food and energy prices to domestic prices has been limited given ad-hoc price mechanisms.