The Central Bank of the United Arab Emirates said, on Wednesday, that the economy of the United Arab Emirates grew by 8.2 percent in the first quarter, on the back of rising oil production.
The central bank said that real GDP is expected to grow by 5.4% this year and 4.2% next year. The strongest growth was likely due to higher oil production and the government’s commitment to double the size of the manufacturing sector by 2031.
Hydrocarbon GDP rose about 13% in the first quarter, and oil production averaged 2.95 million barrels per day.
“Shocks in global oil supply and demand have increased oil price volatility and boosted the price level. Depending on (depending on) developments in global economic activity, recession expectations and geopolitical tensions, there may be scope for an increased oil supply to balance markets and stimulate global growth.”
US President Joe Biden met last weekend with Gulf and other leaders in Saudi Arabia in an effort to secure commitments to increase oil production while trying to curb inflation at home.
Saudi Arabia and the United Arab Emirates are among the few producers with significant spare capacity.
The UAE’s oil GDP is expected to grow 8% this year and 5% in 2023. The central bank said non-oil GDP rose 6.1% in the first quarter and is set to grow 4.3% in 2022 and 3.9% in 2023.
Inflation was expected to be 5.6% for 2022. It was 3.4% in the first quarter compared to the previous year, compared to 2.3% annual inflation in the fourth quarter and 0.6% in the third quarter.
“The transition of higher oil prices to fuel will have a significant impact on the cost of transportation and therefore on headline inflation. This also applies to foodstuffs that are rising exponentially around the world, with inevitable consequences for the UAE.” This is what the central bank said.
The UAE is the only Gulf country that does not have a fuel price cap, and like its neighbors, it imports most of its food. Transportation inflation — with a weight of 12.7% in the consumer basket — jumped 22% in the first quarter.
Average residential property prices in Dubai jumped 11.3% in the first quarter. Off-plan sales jumped 94.6% in the quarter, while aftermarket sales rose 76.1%.
The central bank said: “Upward pressures on inflation will result from higher wages and higher rents. As a result, domestic demand will increase and may put further pressure on prices, especially on non-tradable goods such as rents.”
It added that the impact of imported inflation is expected to decline with the UAE dirham being pegged to the dollar.
(Reporting by Youssef Saba, Editing by Angus Makswan)