We forecast a pick-up in UAE real GDP growth to 4.2% this year, supported by strong construction activity, tourism benefiting from the National Tourism Strategy 2031, and government investments in infrastructure and green energy, given its commitment to reduce emissions. The reversal of last year's oil production cuts should boost growth, as production cuts slowed real GDP growth to 2.8% in 2023. The real estate sector grew strongly in 2023, reaching a record high residential transaction volume of 112 356 for January-November 2023.1 International events, including the COP28 climate summit in Dubai in late 2023, boosted inbound visitor numbers. Visitors to Dubai were 20% higher year-on-year at 15.4 million in January-November 2023.2 Business confidence is also high, the S&P Global Dubai Purchasing Managers' Index (PMI) rising to 57.7 in December 2023 (56.8 in November). The largest sub-component of the index, new orders, expanded by the most in four years. While the growth outlook is positive, downside risks may come from a global slowdown, oil production outlook and geopolitical risk. Conflict in the region would adversely affect tourism and investments, if escalated.

Consumer price inflation cooled to an estimated 2.9% in 2023 (2022: 4.8%) as food prices declined, the dirham (AED) strengthened, and interest rates were hiked. We expect inflation to moderate to 2.5% in 2024 as interest rates stay high and the dirham remains strong, keeping imported inflation contained. The Central Bank of UAE (CBUAE) has kept its policy rate at 5.4% after a cumulative 365 basis points (bps) of rate hikes since April 2022, the last being a 25bps raise in July 2023. As the dirham is pegged to the US dollar, the CBUAE will follow the Fed's lead in the current interest rate cycle. US economic resilience and upside risks to inflation are likely to delay the first US rate cut: we expect easing to begin only in Q2 2024.

Private sector employment grew again in 2023, the central bank reported,4 after surpassing pre-COVID-19 levels in 2022. The employment PMI remained above 50 through 2023, indicating continued expansion. The number of private companies grew by 9.1% y-o-y in 2023 supporting employment growth. Employment of Emiratis is still growing, supported by the Nafis (Emiritisation) programme launched in 2021.5 In 2023, 92 000 Emiratis were employed by the private sector, a 157% increase since launch.6 The labour market has shifted decisively towards skilled employement in recent years (see Figure 1), aided by initiatives by the Ministry of Human Resources & Emiratization (MoHRE). Employment in skilled professions increased from 2017 to 2022 while employment in traditional craft and trade occupations declined. Managerial roles registered the highest growth, of 12% every year from 2017-22.

Based on the November enrollments published, we estimate that about 6.9 million workers (Emiratis and expatriates) subscribed to the scheme in 2023, adding about USD 120 million of premiums to the insurance sector.7 We anticipate that rising employment will further support insurance premiums growth in 2024. The MoHRE is also working to attract international talent to the UAE. Initiatives include extension of the "golden visa" scheme to freelancers, remote workers and entrepreneurs; and the optional alternative for end-of-service gratuity, known as the "Savings Scheme".8 The UAE ranks 22 globally, and first in the Middle East, in the Global Talent Competitiveness Index 2023.