UAE economy to grow by 3.5% in 2023

The UAE’s gross domestic product (GDP) is projected to grow by 3.5 per cent in 2023, rising to 3.9 per cent next year, according to UBS estimates.

Growth is supported by an increase in non-oil activities and strong demand for oil and the country’s energy investments, Michael Bolliger, chief investment officer, emerging markets at UBS Global Wealth Management said in a statement to WAM.

The country’s non-oil economy is projected to grow by a robust 4.5 per cent this year.

Bolliger said the introduction of a 9 per cent corporate tax this year, following the adoption of a 5 per cent value-added tax (VAT) in 2018, contributes to bolstering public finances.

These measures along with other initiatives to further reduce the economy’s dependence on the hydrocarbon sector will further diversify the economy.

“This, in turn, contributes to supporting macroeconomic stability as well as the country’s fiscal accounts and its balance of payment, further boosting the country’s attractiveness as a destination for foreign direct and portfolio investments,” Bolliger said.

Multinational corporations tend to consider corporate tax rates for their expansive investment decisions, Bolliger explained, while noting the UAE’s favourability in this regard, especially as the country levies one of the least corporate tax in the world.

This is in addition to the Emirates being among the countries that rank first in global competitiveness.

UAE’s clean energy investments

Bolliger emphasized that the UAE’s renewables sector has a bright future, as the country aims to reach net-zero carbon emissions by 2050 through expanding the share of renewables in its energy mix, investments in sustainable desalination technologies, and emission reduction in the overall economy.

The structural and social reforms and programmes unveiled recently by the federal government are expected to be a positive catalyst to support the country’s ability to structurally grow at a rate of around 4 per cent per annum.

“Relying more on renewable energy domestically and improving the energy efficiency will free up more hydrocarbons for the export market, which will translate into positive effects for the UAE’s fiscal balance and its balance of payment,” said Bolliger.

On COP28, Bolliger said that the event offers a great opportunity for the UAE to help drive the global effort against climate change and to highlight its net-zero strategy.

“The UAE is among the most competitive regions globally in producing renewable energy, with the country hosting several of the world’s largest and most cost-efficient solar power plants,” he said.

Over the years, the UAE has significantly invested in several landmark solar power projects, such as the Al Dhafra Solar PV plant and Mohammed bin Rashid Al Maktoum Solar Park. The country’s renewable energy projects are expected to help it expand its solar power capacity and support its energy transition.

Meanwhile, Bolliger projected that global economic growth may plunge towards the end of the year or early 2024 due to highly restrictive monetary policy. The global economy is holding up longer than expected as consumer spending and labour markets continue to surprise positively, he added.

Read: Sheikh Mohammed says 2023 ‘best economic year’ as non-oil trade hits all time high