UAE: Central Bank projects 5.2% growth for 2025
The United Arab Emirates (UAE) Central Bank has recently announced its GDP growth forecast for 2025, projecting a growth rate of 5.2%. This projection comes as a revision from the previously estimated 5.7% GDP growth for 2024. As the economic landscape continues to evolve, understanding the factors driving these projections and their implications is crucial for businesses, investors, and policymakers alike.
The latest forecast, outlined in the fourth-quarter 2023 report, indicates a positive outlook for the UAE's economy in the coming years. The projected growth for 2025 is expected to be driven primarily by the oil sector, with a forecasted growth rate of 6.2%. Additionally, the non-oil sector is anticipated to contribute to the economic expansion with a growth rate of 4.7% in 2025.
However, the revised projection for 2024 reflects a more modest growth outlook. The Central Bank now anticipates a GDP growth rate of 4.2% for the year, down from the previously projected 5.7%. This adjustment is attributed to several factors, including a slower-than-expected recovery in oil production following the Opec+ agreement in November 2023 and a declining growth trend in the non-oil sector.
The dynamics of the global economy and geopolitical landscape also play a significant role in shaping the UAE's economic outlook. The Central Bank highlights various downside risks, such as geopolitical tensions, conflicts in neighboring regions, and a potential global economic slowdown. These factors could impact the UAE's growth trajectory, posing challenges to its economic resilience.
Conversely, there are also upside risks to consider, including successful reform implementation, favorable interest rate trends in advanced economies, and increased external demand. These factors could potentially boost economic growth and mitigate some of the risks associated with the global economic environment.
A key factor influencing the UAE's economic performance is its oil output. The Central Bank's projections take into account the Opec+ agreements and anticipate subdued oil production in the near term, with a gradual increase expected from the fourth quarter of 2024 onwards. This cautious approach reflects the UAE's commitment to aligning with international agreements while ensuring stability in the oil market.
Inflation is another aspect of the economic forecast that warrants attention. The Central Bank projects inflation to accelerate to 2.5% in the current year, driven by higher commodity prices and currency dynamics. However, it remains significantly below the world average, indicating a balanced approach to price stability and economic growth.
Looking ahead, the UAE's economic resilience and diversification efforts position it well to navigate challenges and capitalize on opportunities. The country's low fiscal and external breakeven oil prices, coupled with strong non-oil activity and a recovering real estate sector, contribute to its overall economic stability.
In conclusion, the UAE Central Bank's GDP growth projections offer valuable insights into the country's economic trajectory and the factors shaping its outlook. By staying informed and adaptable, stakeholders can effectively navigate the evolving economic landscape and contribute to sustainable growth and prosperity in the UAE.
By: Sahiba Suri
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