The United Arab Emirates (UAE) is projected to maintain its position as the fastest-growing economy in the Gulf Cooperation Council (GCC) region in 2024 and 2025 due to its ability to raise oil output earlier than other Opec+ members. Economists forecast a 3.3 per cent GDP growth for the UAE in 2024 and a significant increase to 5.5 per cent in 2025, surpassing its Gulf peers and other regional countries. The UAE’s strong balance sheet and loose fiscal policy will contribute to its economic growth, allowing it to outpace other countries in the region.
According to World Bank projections, the UAE’s GDP is expected to grow by 3.9 per cent in 2024 and 4.1 per cent in 2025. By comparison, Oman, Bahrain, Qatar, Saudi Arabia, and Kuwait are projected to have varying levels of GDP growth during the same period. The recent decision by Opec+ to extend oil output cuts into next year will provide stability to the market amidst uncertain demand growth and increasing US production. The UAE’s production target was increased by 300,000 barrels per day for the next year, allowing it to capitalize on the newly raised base quota.
With the unwinding of voluntary oil output cuts and the higher production quota, the UAE is expected to have a 6 per cent increase in oil output in 2025 compared to previous estimates. The average Brent crude prices are forecasted to be $83 per barrel in 2024 and $75 per barrel in 2025, which are above the fiscal and current account break-even prices. The UAE government’s strong financial position will enable it to continue with a loose fiscal stance, supporting economic growth and stability in the region.
Recent oil market reports from Opec and the International Energy Agency (IEA) have highlighted disparities in their outlook for 2024 and 2025 demand growth. While Opec anticipates a moderate increase in demand, the IEA has downgraded its forecast due to economic challenges and slow growth in key markets. The subdued outlook is expected to continue into 2025, reflecting lacklustre economic growth, expansion of electric vehicles, and vehicle efficiency gains.
The Gulf economies are poised to experience growth in the coming quarters, primarily driven by an increase in oil output starting from October. The recovery in GDP growth will be influenced by higher oil production, although the boost to GDP may take longer to materialize due to Opec+ decisions. It is anticipated that non-oil sectors will continue to grow steadily, and a loosening monetary cycle is expected to begin soon following the US Federal Reserve’s lead. Inflation in the Gulf is projected to ease, supporting credit demand and consumer spending, although non-oil growth may slow down in the next few years.
