GDP growth hardly back on track
The UAE has proven resilient despite the strong decline in oil prices in 2014-2015. Economic diversification has lowered oil-dependency (today oil accounts for only one third of total exports) and promoted non-oil growth, mainly in the financial and tourism sectors. Still, the overall economic cycle closely follows the oil price (Figure 2).
In 2016, real GDP growth fell to +2.3%, well below the +4.7% average rate achieved in 2012-2015. The slowdown is expected to continue this year (+2%) before a modest recovery to +3% in 2018 is fore-cast. Downward pressures on the economy include the extension of the OPEC deal to limit oil produc¬tion until March 2018, announced in May 2017.
Upside opportunities involve the expected recovery in oil prices in 2017 which will improve liquidity and bolster business sentiment in the medium term. Expo 2020 investments and an increase in the global trade momentum will also contribute to the growth acceleration starting 2018.