UAE Economy Likely To Expand 5% This Year

The UAE recorded real GDP growth of 3.6 per cent year on year in the first half of 2024 according to preliminary national accounts data from the FCSA, with Q2 growth of 3.9 per cent year on year following the 3.4 per cent recorded in the first quarter. Non-oil GDP outpaced the oil sector as it expanded by 4.8 per cent in Q2, an acceleration on the 4.0 per cent in Q1, while ongoing OPEC+ oil production curbs kept hydrocarbons growth at more moderate 1.2 per cent year on year, down slightly from 1.4 per cent growth in the previous quarter but an acceleration on the 3.1 per cent contraction seen in 2023.“As a result, the non-oil economy accounted for a historically high 74.9 per cent of GDP in the second quarter, testament also to ongoing diversification efforts and the growth of new and established non-oil sectors,” Daniel Richards senior economist Emirates NBD Group Research, wrote in the report.

In Dubai, real GDP growth was 3.3 per cent year on year in the second quarter, an acceleration on the 3.2 per cent for Q1.“The growth drivers were broad based across a range of sectors, testament to the ongoing diversification efforts in the economy, and this should mean increased resilience to any external shocks in the coming years,” Richards wrote.

A larger economic base following several years of strong growth means that the pace of expansion has moved to a more sustained level, with expansion of more than three per cent year on year for the last six quarters. The transportation & storage sector remained the primary growth driver in Dubai in Q2, expanding 7.8 per cent year on year. The sector is the second largest component of GDP, making up 13.6 per cent of output in Q2, and contributing nearly a third of total growth, similar to the full-year 2023 results. It encompasses air travel, and the strong performance of the national carriers was cited by the government as helping boost growth, with passenger numbers up 4.5 per cent year on year in the period. Dubai International Airport has seen even stronger growth, with passengers passing through the airport up 8 per cent in the first half.

Freight volumes at DXB are also up this year, as is cargo at Jebel Ali, the emirate's container-handling port. The facility handled 7.3mn twenty-foot equivalent units (TEUs) in the first half, growth of 3.9 per cent year on year, while H2 got off to a strong start with a new record of 1.4 million boxes handled in July, data showed.

Emirates NBD identifies some moderate downside risks to the travel and transport sector this year. The risk of trade wars under a second Trump presidency could impact global shipping volumes.“Nevertheless, Dubai remains in a good place to weather these challenges. Jebel Ali offers world class intermodal transport links and could benefit from disrupted regional trade routes, while the development of the domestic manufacturing sector should also be supportive,” Richards wrote.

Manufacturing expanded 2.5 per cent year on year in Q2, up from 1.6 per cent the previous quarter and accounts for 9.1 per cent of GDP. With development plans such as the D33 agenda, the sector should continue to grow. For air travel, global numbers have now largely recovered from the Covid-19 pandemic slump, leaving diminished reopening gains to be won.“However, the ongoing growth of Dubai's tourism sector should continue to fuel air travel demand, with Dubai Airports CEO Paul Griffiths stating that Dubai as final destination now accounts for 60 per cent of passengers, compared with 40 per cent prior to the pandemic,” Richards wrote.