2024 Q2 Outlook.. UAE Market Shows Ongoing Resiliency with Real GDP Expected to Reach 3.9% According to World Bank

Dubai, 24 May 2024

As economies navigate the interplay between global policies and inflation rates, the slightest data supporting rate cuts is fostering euphoric sentiment across the markets. Inflation rates are gradually decreasing towards their targets, leading central banks to cautiously assess their suitable rate cut dates towards the year-end.

Unlike the United States of America, Dubai’s inflation rates ticked higher in April 2024, rising from 3.3% to 3.9%. Despite this increase, the UAE’s economic growth forecasts show resiliency for the remaining quarters of 2024, with a 3.9% real GDP expectation according to the World Bank.

The positive trend of crude oil so far has further stimulated Dubai’s economy, with the transportation sector leading the charge. In fact, transportation costs increased by 3.3% on a monthly basis in April, adding to inflationary expectations in the coming months.

“While the growth outlook may not be on an upward trajectory for the second quarter, annual growth prospects remain promising, driven by the UAE’s robust economic diversification efforts,” says Razan Hilal, Market Analyst at FOREX.com.

The UAE MSCI Index and Dubai Financial Markets have followed a sideways to bearish track, trading near their yearly lows. Nonetheless, from a fundamental perspective, the housing sector is progressing in line with the Dubai Urban Master Plan 2040.

The technology sector still aligns with the digital economy strategy, aiming to double its contribution to GDP by 2032. The tourism and infrastructure sectors are advancing according to the UAE’s National Tourism Strategy 2031, while initiatives to enhance Foreign Direct Investment seem to progress in line with the UAE’s Green Agenda 2030.

“Sustainable visions are central to the UAE’s long-term economic growth forecasts”, says Hilal, adding: “In the short term, all eyes are on OPEC policies, which are poised to define the oil supply landscape. The upcoming supply decisions will be crucial in determining the trajectory for oil prices in the next quarters.”

According to the CME Group OPEC Watch Tool, there is an 80.6% probability that the policy will remain unchanged. From the UAE’s perspective, maintaining elevated production levels and stabilizing oil prices at lower levels would bolster economic growth and help mitigate inflationary pressures for the remainder of 2024.

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