The UAE’s gross domestic product (GDP) is projected to grow by 5 per cent in 2024, exceeding the 2.8 per cent growth forecast for the global economy, according to S&P Global estimates.
“While the global economy remained subdued operating at subpar growth levels, we estimate that UAE GDP expanded at more than 3 per cent in 2023, including close to 6 per cent growth for the non-oil sector,” Tatiana Leskova, associate director of Corporate Ratings at S&P Global told Emirates News Agency.
The rating agency is projecting continued strong momentum in Dubai’s hospitality, wholesale and retail, and financial services sectors to drive growth in 2024/25.
Leskova said the UAE and Dubai more specifically have remained relatively immune to the global economic headwinds, thanks to the limited sensitivity to interest rates and contained inflation.
Despite higher interest rates, the number of mortgage transactions continued to grow in Dubai, where over 80 per cent of real estate transactions are completed on a cash basis.
In contrast, the European real estate market has been marked by weakened purchasing power since 2022 due to high interest rates and relatively higher inflation.
Furthermore, the Chinese market remains challenging for its leveraged developers, with margins tightening as prices drop, pressuring profitability.
The picture has become a little brighter in the US, where demand picked up at the start of 2023 after a slowdown.
“The profile of buyers evolved slightly since 2022, with a sharp increase in Russian buyers becoming one of the largest investor groups in Dubai,” Leskova added.
“We expect this to be temporary, with Indians, Europeans and GCC buyers remaining the largest investors as per the historic trend.”
Driving UAE economic growth
Meanwhile, the UAE approved the federal budget for 2024-2026 worth Dhs192bn ($52.3bn) last October.
The federal budget estimates expenditures of Dhs64.1bn in 2024, up 1.6 per cent from estimates for 2023 and forecasts total revenues of Dhs65.7bn, up 3.3 per cent over from this year.
Social development and benefits account for 42 per cent (Dhs26.7bn) of the federal budget in 2024, followed by government affairs at 39 per cent or (Dhs25.2bn).
Nearly 16 per cent (Dhs10.2bn) of the total general budget will go to public and university education, 8 per cent (Dhs5.2bn) will be allocated to healthcare and community protection, 6 per cent (Dhs3.6bn) will go towards social affairs while 10 per cent (Dhs6.1bn) of the 2024 budget has been allotted to pensions.
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.