UBS Projects UAE Economy to Grow by 3.5% in 2023
The UAE’s gross domestic product (GDP) is expected to experience a 3.5% growth in 2023, followed by a projected 3.9% growth in the following year, according to estimates by UBS.
This growth is attributed to increased non-oil activities and a strong demand for oil and energy investments in the country, as stated by Michael Bolliger, Chief Investment Officer of Emerging Markets at UBS Global Wealth Management in a statement to WAM.
The non-oil economy of the country is set to grow by a solid 4.5% in the current year.
Bolliger highlighted the positive impact of the introduction of a 9% corporate tax this year, following the implementation of a 5% value-added tax (VAT) in 2018. These measures contribute to strengthening public finances and further diversifying the economy away from its dependence on the hydrocarbon sector.
According to Bolliger, the UAE’s attractiveness as a destination for foreign direct and portfolio investments is supported by its efforts to maintain macroeconomic stability and improve its fiscal accounts and balance of payments. The country’s low corporate tax rates are particularly favorable for multinational corporations considering expansive investment decisions, positioning the UAE as one of the countries with the lowest corporate tax globally.
In addition, the UAE ranks highly in terms of global competitiveness.
UAE’s Clean Energy Investments
Bolliger emphasized the promising future of the UAE’s renewables sector as the country aims to achieve net-zero carbon emissions by 2050. This goal will be pursued through an expansion of renewables in the energy mix, investments in sustainable desalination technologies, and overall emission reduction in the economy.
The recent structural and social reforms and programs introduced by the federal government are expected to support the country’s ability to achieve a structural growth rate of approximately 4% per year.
According to Bolliger, relying more on renewable energy domestically and enhancing energy efficiency will allow for more hydrocarbons to be allocated to the export market. This, in turn, will have positive effects on the UAE’s fiscal balance and balance of payments.
Bolliger also highlighted the opportunity presented by COP28 for the UAE to contribute to the global effort against climate change and showcase its net-zero strategy. He noted that the UAE is already a competitive region in renewable energy production, hosting several large and efficient solar power plants.
Over the years, the UAE has made significant investments in landmark solar power projects such as the Al Dhafra Solar PV plant and Mohammed bin Rashid Al Maktoum Solar Park. These renewable energy projects will help expand the country’s solar power capacity and support its energy transition.
In a separate projection, Bolliger warned of a possible global economic slowdown by the end of the year or early 2024 due to highly restrictive monetary policies. However, he noted that the global economy has held up better than expected, with positive surprises in consumer spending and labor markets.