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Khatija Haque - Head of Research & Chief Economist
Published Date: 24 March 2023
The latest (provisional) data from the UAE ministry of finance show the consolidated budget recorded a surplus of AED 195.7bn in 2022, or 10.5% of estimated GDP, up from AED 61.5bn (4.0% of GDP) in 2021.
Total revenue grew 28.7% y/y in 2022, driven by sharply higher tax revenues which rose more than 60% y/y. The Ministry of Finance does not split out the revenue into oil and non-oil income, but the methodology notes indicate that taxes paid by Abu Dhabi’s oil and gas companies are included in “tax revenue”, along with taxes on foreign banks, customs duties, VAT and other taxes.
Total expenditure was fractionally lower than 2021, with current spending down -0.4% and investment spending up 0.3% y/y after falling sharply in 2021. With inflation averaging around 5% last year, this implies a real cut in consolidated government spending in 2022, despite the surge in oil revenues. The quarterly budget data is subject to revision however, so it’s possible that annual spending last year was higher than the preliminary figures suggest. Nevertheless, the data points to a disciplined fiscal policy last year.
For 2023 we have revised our revenue estimates lower on the back of a lower oil price assumption and no further increase in oil production. While the new corporate income tax comes into effect in the second half of this year, it will only boost revenues in 2024/ 2025. We expect overall tax revenues to be around 9% lower in 2023 and have pencilled in a 5% increase in current spending, slightly more than expected average inflation. We forecast the budget surplus at AED 125.2bn this year, or 6.2% of estimated GDP.
Source: Ministry of Finance, Emirates NBD Research
We have revised up our 2022 GDP growth estimate for the UAE higher to 8.0% from 7.6% previously, on the back of faster non-oil sector growth. Statistics Centre Abu Dhabi reported real GDP growth in the emirate of 10.5% in the first nine months of 2022, with non-oil growth also exceeding 10% over the period. Separately, data for H1 2022 for the whole UAE showed real GDP growth of 8.5%, with the non-oil sectors growing 7.8%. We have thus revised up our forecast for full year non-oil GDP growth to 6.1% from 5.6% previously, and kept our hydrocarbons sector GDP estimate of 13% unchanged.
We have retained our 2023 UAE real GDP growth forecast at 3.9%, as slower global growth and higher interest rates weigh on the non-oil sectors of the economy and oil output is expected to remain largely unchanged from last year.
Source: Haver Analytics, Emirates NBD Research
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