UAE economic growth likely to hit 5% this year, expert says
The UAE's prudent economic policies and diversification efforts are likely to push GDP growth rates to five per cent, an expert said.
'The UAE's 'connector economy' role is the main factor to its success, underpinning trade and capital flows into the country. Booming construction and real estate sector as well as push for higher productivity through investments into IT and specifically AI infrastructure will support strong growth momentum,' Yerlan Syzdykov, Global Head of Emerging Markets at Amundi, told Khaleej Times in an interview.
The World Bank last week raised its forecast for the UAE's economic growth to 4.6 per cent this year and 4.9 per cent next year, citing robust expansion in both hydrocarbon and non-oil sectors.
Syzdykov sees a long-term prospects for growth in GCC countries as very promising, booming consumption coupled with increasing participation rate in most of GCC economies. 'In the short term, we see strong growth momentum, underpinning our forecasts of 3.5 per cent for 2025 for the region at large,' he added.
The tariff war has mostly had an indirect effect on GCC economies, mainly through the impact on oil prices driven by negative effect of trade wars on global growth and demand for energy. 'At the same time, the associated increase in capital and trade flows within Global South fuels further growth of 'connector economies' such as UAE,' Syzdykov said.
The budget assumptions for price of oil vary across different GCC countries, and the most optimistic forecasts behind government revenues come from Kuwait, Saudi Arabia and Bahrain. 'In case we see slower global growth and increased supply of oil, investors will look for significant fiscal adjustment that will be needed to balance the budgets. The two least affected countries with most conservative oil price in their budgets are UAE and Qatar,' Syzdykov said.
Oil markets remain in a soft stage as global tariff wars fuel uncertainties over the demand outlook. 'In case we see softer oil prices, the governments [in the GCC] will need to diversify the sources of funding, which will incentivise them to continue pushing for more IPOs,' Syzdykov said.
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