The UAE’s economic outlook remains strong, with growth expected to reach 3.9 per cent in 2023 while inflation is projected to drop to 3.2 per cent by the end of this year, down from 4.8 per cent last year, Mohamed bin Hadi Al Hussaini, Minister of State for Financial Affairs, has said.
The minister, who participated in the meeting of finance ministers, central bank governors, and heads of regional financial institutions in the Middle East, North Africa, Afghanistan and Pakistan (Menap) region in Washington, said the decline in inflation would be led by stabilising prices and the receding effects of imported inflation globally, while locally, rents and wages are expected to contribute to this trend.
Fitch has cautioned that sticky inflation will begin easing in the UAE but would continue to weigh on spending in 2023.
Analysts at Fitch projected the UAE’s real household spending to grow 4.0 per cent in 2023, the same rate as in 2022. They said the growth will largely be due to elevated domestic fuel prices, rising rental prices and strong demand-side pressures in 2022 that led to the tightening of monetary policy and lower real household spending growth.
Dubai saw its annual inflation rate rising to 4.9 per cent in February driven by an increase in food and beverages costs, the latest data from the emirate’s Statistics Center showed. Dubai’s Consumer Price Index rallied by 0.32 per cent in February from 4.58 per cent in January.
Food and beverage prices in Dubai increased by 6.29 per cent in February, while the prices of housing, water, electricity, gas and other fuels surged by 4.87 per cent.
The rise in inflation was also driven by an increase in prices of restaurants and accommodation services and insurance and financial services which went up by 4.47 per cent and 5.41 per cent respectively, according to analysts.
At the Menap meeting chaired by Kristalina Georgieva, managing director of the International Monetary Fund, Minister Al Hussaini noted that despite the economic resilience that the UAE and the wider region had demonstrated, various countries in the region remain exposed to the elevated global uncertainties as highlighted in the IMF Background Note, which underpins the need for regional collaboration efforts and to work with the Fund. “This is to accelerate efforts to promote fiscal sustainability and address debt vulnerability, which remains a key concern, with potential for longer-term effects on fiscal balances and disruptions to structural development plans,” he said.
The UAE minister praised the Fund’s perspective on leveraging fiscal policy to address inflationary pressures and promote economic stability in the region. “The persistence of the current economic challenges will continue to entail tradeoffs between debt sustainability and long-term sustainable development objectives.”
The IMF recently projected that the UAE economy will expand at a faster pace in 2024 at 3.9 per cent as compared to 3.5 per cent this year while downgrading the 2023 forecast by 0.7 per cent from 4.2 per cent in October to 3.5 per cent.
A senior World Bank official said the UAE’s GDP is expected to grow by 4.1 per cent in 2023, a forecast is higher than the 3.9 per cent anticipated by the UAE Central Bank in its recent Quarterly Economic Review.
“Despite the difficult global economic conditions, our estimates suggest that the UAE economy will grow by about 4.1 per cent next year, benefiting greatly from the strong recovery of the non-oil economy,” said Essam Abu Suleiman, World Bank regional director for the GCC.
The UAE Central Bank expects the country’s economy to grow by 4.3 per cent in 2024, up from an estimated 3.9 per cent this year, as Moody’s forecast the growth to moderate to 4.0 per cent driven by the modest contraction in oil output as agreed with the Opec and its partners.
The regulator maintained its growth forecast of 3.9 per cent growth for the current year and projected that the non-oil economy will grow by 4.6 per cent and oil gross domestic product by 3.5 per cent next year.