UAE economy to grow by 3% in 2023, says S&P Global

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The UAE’s gross domestic product (GDP) is projected to grow by 3 per cent in 2023, rising to 4 per cent next year, according to S&P Global estimates.

Growth is driven by the non-oil sector, which is expected to benefit from strong growth in tourism, government initiatives, and technological advancements, analysts at the credit rating agency said in a statement to state news agency, WAM.

Over the years, the UAE has implemented several comprehensive economic and social initiatives that are designed to set the stage for sustained and long-term growth, said S&P Global.

Trevor Cullinan, sovereign ratings analyst at S&P Global said key contributors to the country’s economic growth, include oil and gas, wholesale trade, industry, real estate, construction, financial services, and tourism.

Cullinan forecasted that the non-oil economy will be bolstered by inflows of expatriates and tourists, as well as positive sentiment from investors, consumers, and the private sector.

This is in line with the “We Are the Emirates 2031” vision, which aims to increase trade volume and the tourism share of GDP through cooperation between government agencies, institutions, and the private sector.

Driving UAE economic growth

S&P Global analysts projected continued growth within the UAE’s tourism sector. The country’s ability to host major international events such as the upcoming COP28 is expected to play a pivotal role in achieving its ambitious goal of attracting 40 million visitors by 2030.

The Emirates also plans to expand the number of hotel rooms to 250,000 during the same period.

Dubai attracted 14.7 million international visitors in 2022, double what was achieved in 2021 and the number is set to dwarf the pre-pandemic figure of 16.7 million visitors that was recorded in 2019.

Similarly, Abu Dhabi received 4.1 million hotel guests in 2022, an increase of 24 per cent from 2021.

Tatiana Lysenko, lead economist for emerging markets at S&P Global expects the expansion of the tourism sector to support greater economic growth in the UAE.

Cullinan said the UAE has implemented wide-ranging commercial and social initiatives over the past few years that are expected to drive long-term economic growth.

These initiatives include allowing 100 per cent direct foreign ownership in more than 1,000 commercial and industrial activities, introducing an insolvency law, improving the country’s competitiveness in terms of ease of doing business and introducing visa regimes.

Cullinan further highlighted that the implementation of the corporate tax will contribute to diversifying government revenues away from the oil sector and modernising the business environment in the country.

The UAE’s banking sector has remained robust, with profitability improving beyond pre-pandemic levels due to rising interest rates.

Mohamed Damak, senior director and global head of Islamic finance at S&P Global expects the capitalisation of the banking system to remain strong, supported by improved internal capital generation, good financing and liquidity conditions.

Read: UAE economy to grow by 3.5% in 2023