Headwinds from low oil prices and a decline in global trade slowed the UAE’s economic growth from 3.8 per cent in 2015 to 3 per cent last year. But the forecast from the International Monetary Fund (IMF) indicates that the country’s growth curve will bottom out this year with a projected GDP (gross domestic product) growth of 1.3 per cent, which is expected to surge to 3.4 per cent in 2018.
The IMF forecasts and projections issued by reputed global agencies point to a turnaround from the second half of this year, with significant momentum from the non-oil economy. The country’s economic performance was subdued during most of last year, driven largely by weaker oil prices, slower oil output growth and the postponement of some public infrastructure projects. A combination of factors — such as increased domestic public investment and improved global trade — has given a much needed fillip to the non-oil private sector. Growth in this sector is projected to rise to 3.3 per cent in 2017, from the 2.7 per cent seen in 2016. Over the medium term, it is expected to remain above 3 per cent.
The UAE Purchasing Manager’s Index (PMI) for the first half of the year shows that the non-oil private sector has been largely resilient to oil sector turbulence. The average PMI reading for the second quarter was 55.4, marginally softer than the first quarter and consistent with a strong rate of non-oil private sector growth. The second-quarter PMI reading is also much higher than that for the corresponding quarter last year, confirming that non-oil growth is set to drive the positive outlook. But the extension of oil production cuts is likely to weigh on the overall growth momentum.