The high growth rate of the UAE economy, which began in the first half of 2022, has been maintained throughout the year. The improvement of the epidemiological situation and the lifting of a number of restrictions along with the holding of EXPO 2020 became a serious impetus for economic growth at the beginning of the year.
Further development was supported by the growth of the real estate sector, despite the fact that in June, housing prices in Dubai reached a thirteen-year high. In addition, the positive dynamics is provided by the development of the tourism sector, which accounts for about 16% of the country's GDP. The government's rapid and effective response to the COVID-19 pandemic, combined with fiscal policy measures and socio-economic reforms, provided strong support for the UAE's economic growth in 2022. According to the IMF, in 2022, the UAE's GDP growth was 7.4%.
Despite the slowdown in GDP growth to 3.5% in 2023, the country's development prospects remain positive, which is facilitated by the growth of economic activity, the continuation of structural reforms aimed at increasing investment attractiveness and diversification of the economy, the influx of investments in knowledge-intensive industries, the implementation of large-scale projects in Abu Dhabi and Dubai, high revenues of the oil sector, as well as the rapid rise of the tourism sector, which, along with government spending within the budget for 2023-2026, will ensure the growth of non-oil GDP by 3.8%.
In general, the IMF forecasts coincide with the forecasts of other consulting agencies, economists and government agencies. The latest forecasts from Oxford Economics and the UAE Central Bank expect GDP growth of 3.1–3.3% and non–oil GDP growth of 3.8-4.5% in 2023.
Positive forecasts for 2023 are based on the increasing role of the tourism sector, the growth of FDI, as well as an increase in expenditures within the approved Federal Budget for 2023-2026 to support the socio-economic development of the country. In the medium term, the growth of the UAE economy is expected to be supported by the structural reforms of the UAE, as well as the promotion of foreign economic policy in the field of Comprehensive Economic Partnership Agreements that will stimulate trade and integration into global value chains and facilitate the attraction of FDI.
Until 2020, the dynamics of GDP per capita in the UAE was positive, but after the recession in 2020 (primarily due to the COVID-19 pandemic), there is a rapid recovery of the indicator and its growth against the background of easing restrictions, the recovery of business activity and the tourism sector, government support, growth of foreign investment, growth of income from the oil sector.
From 2012 to 2017, the average inflation rate did not exceed 2.5%. The introduction of 5% VAT and excise tax accelerated the growth of this indicator to 3.1% in 2018. Subsequently, against the background of falling real estate prices, the inflation rate decreased significantly.
In 2022, real estate prices reached a 13-year high, which, combined with rising prices for consumer goods and fuel, as well as global inflationary pressures, led to an increase in inflation to 4.8%. Overall, inflation has risen in line with global trends, and is expected to decline to 3.4% in 2023.
