UAE GDP to grow by 4.2% in 2024, rising to 5.2% in 2025: Central Bank

The Central Bank of the United Arab Emirates (CBUAE) expects the country’s Gross Domestic Product (GDP) to grow by 4.2 per cent in 2024, rising to 5.2 percent in 2025, while maintaining its estimate for a 3.1 percent growth in 2023.

In its quarterly economic review report for the fourth quarter (Q4) of 2023, the Central Bank also forecasted a non-oil GDP growth of 4.7 per cent in both 2024 and 2025, and an oil GDP growth of 2.9 per cent in 2024 and 6.2 per cent in 2025.

The Central Bank noted that the UAE’s consolidated fiscal balance for the first nine months of 2023 posted a surplus of Dhs61 billion, equivalent to 4.4 percent of GDP, with total revenues reaching around Dhs370 billion, while expenditures amounted to about Dhs309 billion.

The CBUAE report anticipated that the recent introduction of a federal corporate tax is poised to further strengthen government finances, contributing to the diversification of revenue sources away from the oil sector.

The report also pointed out the continued strength of the non-oil private sector, showing signs of robust economic activity, with the Purchasing Managers’ Index (PMI) reaching 56.6 in January 2024, driven by ongoing business confidence in economic outlooks. This optimism is based on expectations of sustained demand and sales, expected to support continuous expansion in production, along with the possibility of new projects and increased investment.

The report highlighted that the PMI in Dubai reached 56.6 last January, indicating sustainable growth in the emirate’s non-oil private sector.

According to the CBUAE report, positive readings regarding employment and wage growth indicate strong future consumption. The number of employees in the private sector, measured by the 3-month moving average, increased by 3.1 percent in the fourth quarter of last year. The 3-month moving average of wages in the same quarter increased by 7.4 percent compared to the same period in 2022, enhancing individuals’ purchasing power.

The UAE insurance sector continued to grow in Q4 2023, as reflected by the increase in the gross written premiums. As of year-end, the number of licenced insurance companies in the UAE remained at 60, the CBUAE announced in its quarterly economic report Q4, 2023.

The insurance sector comprised 23 traditional national companies, 10 Takaful national and 27 foreign companies, while the number of insurance-related professions remained at 491.

Gross Written Premium: According to the Central Bank report, the gross written premium increased by 12.7 percent YoY in Q4 2023 to Dhs 53.2 billion, mostly due to an increase in health insurance premiums by 16.5 percent YoY and an increase in property and liability insurance premiums by 18.9 percent YoY, while the insurance of persons and fund accumulation premiums decreased by 12.4 percent YoY, resulting primarily from the decrease in individual life premiums.

Paid Claims

The report indicated that the gross paid claims of all types of insurance plans increased by 12.8 percent YoY to Dhs 31.1 billion at the end of 2023. This was mainly driven by the increase in claims paid in health insurance by 16.9 percent YoY and the increase in paid claims in property and liability insurance by 10.9 percent YoY, partially offset by the decline in claims paid in insurance of persons and fund accumulation by 2.8 percent YoY.

The total technical provisions of all types of insurance increased by 8.4 percent YoY to Dhs 74.4 billion in Q4 2023 compared to Dhs 68.6 billion in Q4 2022.

The volume of invested assets in the insurance sector amounted to Dhs 76 billion (60.4 percent of total assets) in Q4 2023 compared to Dhs 71.4 billion (59.4 percent of total assets) in Q4 2022.The retention ratio of written insurance premiums for all types of insurance was 52.9 percent (Dhs 28.1 billion) in Q4 2023, compared to 54.9 percent (Dhs 25.9 billion) at the end of 2022.

Insurance Soundness Indicators: The UAE insurance sector remained well-capitalised in terms of early warning ratios and risk assessment. Own funds to minimum capital requirement ratio increased to 335.7 percent in Q4 2023, compared to 309.3 percent at the end of 2022, due to an increase in own funds eligible to meet the minimum capital requirements.

Also, own funds to solvency capital requirement ratio rose to 221 percent in Q4 2023 compared to 208.5 percent in Q4 2022, due to an increase in own funds eligible to meet solvency capital requirements. Finally, own funds to minimum guarantee fund ratio reached 316.3 percent at the end of 2023 down from 314.6 percent a year earlier, due to higher eligible funds to meet minimum guarantee funds.

In terms of profitability, the net total profit to net written premiums increased to 6.5 percent in Q4 2023, compared to 2.9 percent at the end of 2022. The return on average assets increased to 0.3 percent in Q4 2023 compared to 0.1 percent in the previous year.

WAM