The outlook for the UAE economy improved significantly in the first half of 2022 thanks to the surge in oil prices caused by the war in Ukraine.
In April 2022, the IMF said the UAE’s oil receipts in 2022 would be about AED700bn, up 46 per cent on its October 2021 projection of AED480bn. The revised forecast is based on an assumed average oil price of $107 a barrel in 2022.
The fund also said the UAE’s GDP would expand to about $501bn in 2022, a 17 per cent revision on the $428bn projection in October 2021. The UAE’s real GDP growth is expected to be 4.2 per cent in 2022 and 3.8 per cent in 2023.
After six challenging years of tight controls on public spending, caused first by low oil prices and then the coronavirus pandemic, the change in the country’s economic and fiscal outlook boosts hopes for a pickup in project spending.
Crucially, the oil windfall has transformed an anticipated budget deficit of -0.2 per cent in 2022 to an 8.1 per cent surplus. This will see public debt slashed from 38.3 per cent of GDP to 31.7 per cent, giving the government room to raise spending, as well as providing a war chest to mitigate rising political and economic risks, such as inflation.
There is plenty of scope for growth in the UAE projects market. The UAE has a pipeline of more than $500bn of planned projects, and the $25bn of contract awards made in the UAE in 2021 is some 40 per cent below the $34bn average annual value of awards since 2012.
The challenge is finance. While the UAE’s financial position has improved in 2022, the fiscal legacy of the pandemic and growing risks facing the global economy will force authorities to keep a tight rein on spending. The shift to public-private partnerships will continue.
Economic and industrial diversification, investment in infrastructure and job creation remain the prime objectives of the country’s national vision and will underpin investment in transport and logistics infrastructure, power, clean energy, Dubai real estate and Abu Dhabi oil, gas and petrochemicals.
In most spheres, the UAE’s view is long term, from developing the country’s petrochemicals capacity at Ruwais to the decarbonisation of the economy to hit the government’s net-zero 2050 target.
As the host of the Cop 28 climate change summit in November 2023, Abu Dhabi will be keen to showcase its achievements against climate change.
Abu Dhabi National Oil Company (Adnoc) will be a key project sponsor in the coming years with a 2021–25 capital expenditure (capex) budget of $122bn approved by Abu Dhabi’s Supreme Petroleum Council (SPC).
At the same time, the revival of the Hail and Ghasha gas project signals that Abu Dhabi is also eyeing the gas market opportunities likely to develop in Europe as Western governments turn their backs on Russian gas.
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