The UAE has revised its economic growth forecast for this year downward due to lower oil production below its OPEC+ quota.

GDP is now forecast at 4.2% for this year, as per the central bank's quarterly economic review, a decline from a previous estimate of 5.7% in December, Bloomberg reports.

This is predominantly a result of "a slower recovery in oil production in light of the OPEC+ agreement in November 2023, and a robust yet declining growth in the non-oil sector," according to the report. 

The central bank predicts oil-sector growth at just below 3%, under the prior forecast of 8.1%, and corresponding to average oil production of 3 million barrels per day.

Additionally, non-oil GDP is predicted to hit 4.7%, aligned with previous forecasts.

The projection could provide the UAE with leverage to challenge its OPEC+ output restrictions at the group's upcoming meeting in June.

The country has the capability to produce considerably more crude oil than its current quota allows, and it has demonstrated a readiness to utilise its newly installed capacity, the Bloomberg report adds.

The lower forecast is "solely a function of lower anticipated oil production in 2024," said Carla Slim, a Standard Chartered economist, which is a "sizable growth downgrade as the central bank has shaved 1.5% off of its 2024 growth estimate." 

Nevertheless, "non-oil growth projections have been kept stable at 4.7%, marking little expectations of a slowdown in non-oil sectors," she added.

The UAE boasts arguably the most diversified economy among its Gulf neighbours, with its oil-rich capital Abu Dhabi evolving into a hub for international investment. 

However, despite this diversification, the Gulf nation remains heavily dependent on oil production and prices to maintain economic growth.