Increasing Real GDP growth in the run up to 2020, despite ongoing economic headwind in Dubai
016 overview and 2017 outlook
The EIU forecasts that real GDP growth in the UAE will rebound in 2018, averaging 3.2% per year between 2018 and 2020. This represents an increase from the 2.0% real GDP growth forecast for the UAE in 2017. Real GDP growth in the UAE is forecast to outperform the world economy each year between 2018 and 2020.
Despite this, a number of economic headwinds remain. These range from diminishing global economic growth prospects through to relatively large Government and Government Related Entity (“GRE”) debt, which according to the EIU currently accounts for approximately one third of the UAE’s GDP.
On a more positive note, OPEC agreed to its first oil production cut in 8 years in November 2016. This should push oil prices up towards and ultimately beyond the EIU’s estimated fiscal breakeven oil price of US$60 per barrel for Abu Dhabi, the main contributor to the UAE federal budget.
Data from Oxford Economics forecasts that Dubai’s population will increase from 2.6 million in 2017 to 2.9 million in 2021. Average household personal disposable incomes in Dubai are however forecast by Oxford Economics to decline steadily over the same period. This is largely due to inflation increasing at a faster rate than wage growth and the interrelated impact of ongoing subsidy cuts.