The UAE is set to continue as the Gulf's leading economy this year and next, experiencing strong growth despite a slower beginning in early 2024.

Recently released Q1 GDP data from Abu Dhabi and Dubai indicated a slightly weaker start to the year. Abu Dhabi's economic growth decelerated from 4.1% year-on-year in Q4 2023 to 3.3% year-on-year in Q1 2024, Khaleej Times reports.

“The UAE’s economy has been the strongest performer in the Gulf over the past year or so and a robust non-oil sector should help the UAE retain its crown as the fastest-growing economy in the region,” said James Swanston, economist for Mena region at Capital Economics.

For Abu Dhabi, Q1 data revealed a slowdown in growth across both the oil and non-oil sectors. Whereas in Q2, oil production volumes remained relatively stable compared to Q1. 

However, in year-on-year terms, growth improved from -4.2% in Q1 to -1.0%, representing the fastest pace of oil output growth since Q1 2023, according to Capital Economics.

Yet Dubai’s growth dipped to 3.2%: “Given that these are the two largest Emirates, it would be fair to say that growth slowed at the national level too,” Swanston added.

“We expect that the UAE’s economy will grow by 3.3% this year as activity in the private non-oil economy softens a touch and oil output remains constrained. However, that would still make the UAE the fastest-growing economy in the Gulf. As oil output rises next year, we expect that GDP growth will accelerate to an above-consensus 5.5% in 2025 – again meaning that the UAE retains its crown as the fastest-growing economy in the region,” he went on to say.

Earlier this year, the Central Bank of the UAE forecast strong growth of 4.2% for 2024, with an even higher growth rate of 5.2% expected for 2025, primarily driven by non-oil GDP. 

Similarly, in May, the IMF projected around 4% GDP growth for 2024, an upward revision from its April forecast of 3.5%.

Furthermore, at the most recent OPEC+ meeting, the group decided to keep oil production levels largely unchanged until October, with plans to gradually reverse voluntary output cuts afterward.

“The UAE negotiated a favourable increase to its base production quota to take effect in January 2025. The recent fall in oil prices raises the risk that planned output rises are delayed. But the oil sector will provide a fillip to the UAE’s economy and result in a sharp acceleration in oil GDP growth at some point over the coming quarters,” said Swanston.