UAE Revises Down Economic Growth Forecast Amid OPEC+ Quota Constraints

In the wake of revised projections, the United Arab Emirates (UAE) confronts a recalibrated economic landscape for 2024, primarily influenced by adjustments in oil production under the OPEC+ agreement.

The UAE’s central bank quarterly economic review has tempered previous optimism, now forecasting a GDP growth rate of 4.2% for the year, a notable revision from the earlier 5.7% estimate issued in December.

Attributing this adjustment, the report cites a combination of factors, notably a more gradual recovery in oil production following the OPEC+ accord in November 2023, alongside a resilient yet moderating expansion in the non-oil sectors.

Specifically, the central bank anticipates a tempered growth rate of just under 3% in the oil sector, substantially lower than the previously forecasted 8.1%. This adjustment aligns with an average oil production projection of 3 million barrels per day. Conversely, the non-oil GDP growth remains steady at 4.7%, in line with earlier projections.

While this downward revision offers insights into the UAE’s economic trajectory, it also serves as a potential catalyst for reconsideration within OPEC+ deliberations slated for June. With the UAE possessing surplus capacity beyond current quotas and a demonstrated eagerness to utilize it, the revised forecast may provide leverage in renegotiating output limits.

Carla Slim, an economist at Standard Chartered Plc., underscores the significance of this adjustment, characterizing it as a notable downgrade of 1.5% from the initial growth estimate. However, she highlights the stability in non-oil growth projections, suggesting limited anticipation of deceleration in those sectors.

Notwithstanding the challenges posed by fluctuating oil dynamics, the UAE’s economy retains its reputation for diversification, notably exemplified by the burgeoning financial hub of Abu Dhabi. Despite attracting international investors and fostering a favorable climate for business, the nation’s economic stability remains tethered to oil production and market dynamics.

In conclusion, the UAE’s recalibrated economic growth projections underscore the intricacies of balancing oil sector realities with the imperative of diversification. As the nation navigates these challenges, its position within OPEC+ negotiations and its commitment to economic resilience will be closely monitored.