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The World Bank predicts that the UAE’s real GDP will rise to 4.1% by 2025

Abu Dhabi

Image used for illustrative purposes.

According to the World Bank’s latest Global Economic Prospects report, the UAE’s real GDP is expected to grow by 3.9 percent in 2024 and rise to 4.1 percent in 2025.

In April 2024, the World Bank increased its forecast for real GDP growth in the UAE to 3.9 percent in 2024, up from January’s forecast of 3.7 percent. Growth in the Middle East and North Africa is expected to pick up to 2.8 percent in 2024 and 4.2 percent in 2025.

Growth in Gulf Cooperation Council (GCC) countries is expected to increase to 2.8 percent in 2024 and 4.7 percent in 2025.

The economies of oil exporters are expected to grow by 2.9 percent and 4.2 percent, respectively, in 2024 and 2025, while those of oil importers are expected to grow by 2.9 percent and 4.2 percent, respectively, in 2024 and 2025. percent will achieve.

The global economy is expected to stabilize in 2024 for the first time in three years, but at levels that are weak by recent historical standards, according to the World Bank’s latest Global Economic Prospects report.

Global growth is expected to remain stable at 2.6% in 2024, before rising to an average of 2.7% in 2025-2026. That is well below the average of 3.1% in the decade before COVID-19. The forecast implies that over the course of 2024-2026, countries representing more than 80% of the world’s population and global GDP will still grow more slowly than in the decade before COVID-19.

Overall, developing economies are expected to grow by an average of 4% over 2024-2025, slightly slower than in 2023. Growth in low-income economies is expected to accelerate from 3.8% in 2023 to 5% in 2024 .The 2024 forecasts Growth reflects the downward revision in three of the four low-income economies since January. In advanced economies, growth will remain stable at 1.5% in 2024, before rising to 1.7% in 2025.

“Four years after the upheavals caused by the pandemic, conflict, inflation and monetary tightening, global economic growth appears to be stabilizing,” said Indermit Gill, chief economist and senior vice president of the World Bank. “However, growth is at lower levels than before 2020. The prospects for the world’s poorest economies are even more worrying. They face punitive levels of debt servicing, restrictive trading opportunities and costly climate events. Developing economies will need to find ways to encourage private investment, reduce public debt and improve education, healthcare and basic infrastructure. The poorest among them – especially the 75 countries eligible for concessional aid from the International Development Association – will not be able to do this without international support.”

This year, one in four developing economies are expected to remain poorer than on the eve of the pandemic in 2019. This share is twice as high for countries in fragile and conflict-affected situations. Moreover, the income gap between developing economies and advanced economies will widen in almost half of developing economies over the period 2020-2024 – the highest percentage since the 1990s. Per capita income in these economies – a key indicator of living standards – is expected to grow by an average of 3.0% through 2026, well below the average of 3.8% in the decade before COVID-19.

Global inflation is expected to moderate to 3.5% in 2024 and 2.9% in 2025, but the pace of decline is slower than forecast just six months ago. As a result, many central banks are expected to remain cautious in cutting policy rates. Global interest rates are likely to remain high by the standards of recent decades, averaging around 4% over the 2025-2026 period, roughly double the average over the 2000-2019 period.

“While food and energy prices have moderated around the world, core inflation remains relatively high – and could remain so,” said Ayhan Kose, World Bank deputy chief economist and director of the Prospects Group. “That could prompt central banks in major advanced economies to delay interest rate cuts. An environment of ‘higher-for-longer’ interest rates would mean tighter global financial conditions and much weaker growth in developing economies.”

The latest Global Economic Prospects report also contains two analytical chapters of current interest. The first outlines how public investment can be used to accelerate private investment and promote economic growth. It finds that public investment growth in developing economies has halved since the global financial crisis, falling to an annual average of 5% over the past decade. Yet public investments can be a powerful policy instrument. For developing economies with sufficient fiscal space and efficient public spending, an increase in public investment by 1% of GDP could increase output levels by as much as 1.6% in the medium term.

The second analytical chapter examines why small states, with a population of about 1.5 million people or less, face chronic budget problems. Two-fifths of the 35 developing economies that are small states are at high risk of debt problems or are already in one. That is roughly double the share of other developing economies. Comprehensive reforms are needed to address the budgetary challenges of small states. Revenues could be derived from a more stable and secure tax base. Spending efficiency can be improved, especially in the areas of health, education and infrastructure. Fiscal frameworks could be adopted to manage the increased frequency of natural disasters and other shocks. Targeted and coordinated global policies can also help these countries get on a more sustainable fiscal path.

WAM