Real GDP growth in the UAE is estimated to have slowed considerably from 3.0 percent in 2016 to 0.8 percent in 2017. The 2.5 percent contraction in hydrocarbon GDP was offset by non-hydrocarbon GDP growth of 1.9 percent. Petroleum production fell by 3.5 percent, and real growth in services dropped by 0.5 pp (real estate growth fell by 4.2 percent). On the demand side, a contraction in private consumption and slowdown in gross fixed investment were offset by a marked rebound in government consumption compared to 2016.
Real GDP growth is projected to rise to 2 percent in 2018 driven by a revised OPEC+ deal resulting in increased oil production and by a boost in the non-oil sector. Economic growth is forecast to reach 3.2 percent by 2020 through the unwinding of the OPEC+ agreement and the government¡¯s economic stimulus plans as well as impetus from hosting Expo 2020. Inflation is projected to rise to 4.2 percent in 2018, before moderating to 2.5 percent by 2020 as the impact of the VAT dissipates.