The UAE central bank on Wednesday announced that the nation's economy grew by an estimated 8.2% in the first quarter, with the country buoyed by the significant increase in oil. Real gross domestic product (GDP) is expected to grow 5.4% this year and 4.2% next year, the central bank said. There was a high probability of stronger growth due to higher oil production and a government pledge to double the manufacturing sector's size by 2031. Hydrocarbon GDP climbed an estimated 13% in the first quarter when oil production averaged 2.95 million barrels per day. The UAE's oil GDP is expected to grow by 8% this year and 5% in 2023. Non-oil GDP was up 6.1% in the first quarter and was seen growing 4.3% in 2022 and 3.9% in 2023
“Shocks in global oil supply and demand have increased the volatility of oil prices and strengthened its level. Depending on developments in global economic activity, recessionary expectations and geopolitical tensions, there may be room for more oil supply to balance markets and spur global growth,” the central bank said.
Despite the positive growth the country is also trying to control the issue of rising inflation. The consumer price index (CPI) increased by 3.4 percent during 2022 Q1, the central bank said, compared to 0.6 percent and 2.3 percent in Q3 and Q4 2021. Average prices of transportation services rose by 22 percent year-on-year during the first quarter, as a result of the increase in fuel, oil and car prices. The UAE is the only Gulf Arab country that does not have a price cap on fuel.
Why it matters
Despite the ongoing push from the UAE (and by extension its Gulf neighbours) to diversify its income, oil is still king. Geopolitical tensions in Europe have led oil-producing nations to record boom years within their respective economies. Yes UAE could be the market leader in web3 and still be an attractive place for tourists to come and sun themselves - however, oil prices reign supreme for the nation.