Image credit: Getty Images
According to the Organization of the Petroleum Exporting Countries (OPEC), the UAE continues to experience strong economic growth, particularly in non-oil sectors such as real estate, tourism and manufacturing.
In its August 2024 Monthly Oil Market Report (MOMR), OPEC highlighted that the UAE economy is expanding steadily, supported by increased domestic and international economic activity.
The UAE saw slight increases in housing, water, electricity, gas and other fuel costs in June, which account for more than 40 percent of the Consumer Price Index (CPI).
Those costs rose 6.7% year-on-year, up from 6.6% in May. Food and beverage inflation remained relatively stable, rising slightly to 2.4% in June from 2.3% in May.
CEPA
Internationally, the UAE Central Bank recently signed currency swap agreements with Ethiopia, Seychelles and Indonesia.
These agreements aim to enhance cross-border trade and improve cooperation in payment systems. Additionally, the UAE signed a Comprehensive Economic Partnership Agreement (CEPA) with Mauritius, aiming to eliminate tariffs and boost trade, strengthening the UAE’s economic and diplomatic ties with Africa.
As a member of the GCC, the UAE has also held talks with Turkey towards a free trade agreement.
IMF forecast
OPEC’s optimistic outlook for the UAE is in line with earlier projections from the International Monetary Fund (IMF), which predicted the UAE’s gross domestic product (GDP) would expand by 4 percent in 2024.
The IMF attributed the growth to strong activity in the tourism, construction, manufacturing and financial services sectors, and noted that strong foreign demand for real estate, combined with the UAE’s safe-haven status, have fueled a surge in home prices and rents, contributing to liquidity in the country.
The UAE’s economic growth is expected to be further boosted by stronger hydrocarbon GDP growth, due in part to increased crude oil production following OPEC+ quota adjustments.
Inflation is expected to remain contained at around 2%, and fiscal and current account surpluses are expected to remain strong, supported by relatively high oil prices.
The general government surplus is forecast to be around 5 percent of GDP in 2024, and public debt is expected to decline further towards 30 percent of GDP. The current account surplus is forecast to be around 9 percent of GDP in 2024.
Oil prices
In the broader oil market, OPEC reported that the premium of Tapiz crude over Dubai has widened as sour crude prices have risen at a slower pace than light sweet crudes due to fluctuations in Asian crude prices. The spread between Brent and Dubai crude has also widened, reflecting the strengthening position of light sweet crudes amid limited west-to-east arbitrage.
Image credit: OPEC MOMR
In July, the Tapiz-Dubai spread widened by $2.56 from the previous month to average $4.92 per barrel.
Last month, crude oil futures prices rose and all major crude oil indexes showed sharp inversions, suggesting an improving outlook for global crude oil supply and demand. The NYMEX WTI forward curve also rose, driven by a decline in U.S. commercial crude oil inventories, which contributed to a sharp rise in the front end of the forward curve.
Image credit: OPEC MOMR
Oil demand
Despite these positive indicators, OPEC revised its forecast for global oil demand growth in 2024, citing weaker-than-expected data for the first half of the year and weak expectations for China. The organization also lowered its outlook for next year, reflecting concerns about the global economic environment.
As the UAE seeks to maintain its growth trajectory and further diversify its economy amid uncertainty in the global oil market, its strategic economic policies and international partnerships continue to position the country for strength.
OPEC cuts 2024 oil demand growth forecast due to China