UAE to see 4.2% growth despite inflation rise

UAE is on the verge to achieve a growth of 4.2 percent for 2022 while the inflationary pressure is rising according to the latest review by the UAE Central Bank. The GDP grew by 2.3 percent in 2021 up from an earlier forecast of 2.1 percent. The real GDP growth is projected at 4.2 percent with the non-oil while real-oil GDP forecasts tend to grow by 3.9 and 5 percent respectively. The central bank has reflected the strong economic recovery to effective containment of the virus in UAE which led to strong and higher gains while improving the oil output. The production of oil increased by 9.3 percent in the fourth quarter of 2021. The rising oil and gas prices are beneficial for the UAE’s external position and also contribute to the budget revenue which raises the cost of transportation and puts pressure on the domestic inflation. The non-oil exports of the UAE have increased by 29 percent in Quarter-four of 2021 and imports by 26.6 percent. The central bank shows the key non-oil sectors that contributed to the economy such as travel, tourism, hospitality sector, real estate, and telecommunications that led to a strong recovery of the economy.

Impact of Inflationary Pressures

The inflationary pressure in the economy has largely contributed globally and contributed to rising inflation. The consumer price inflation accelerated in the fourth quarter of 2021 by 2.3 percent year average that has seen an increase of 0.6 percent in Q3 of 2021. The import prices are highly affected by the pass-through of global inflation however it appreciated the US Dollar and Dirham. The major factors that have driven the price increase are energy prices, inflation in imports, rising wages, and the list goes on. The risks are quite significant due to the disruptions by the Russia-Ukraine War that caused potential disruptions in the oil markets and affected the supply chains that increased the food prices. The high oil prices have affected the cost of transportation by 17 percent. The inflation will be around 2.6 percent in 2022 and grows by 3.3 percent in quarter one of 2022. High Employment Opportunities Employment growth is higher than ever and the strengthening of private and public investment supports domestic employment by increasing by 3.1 percent. The easy rules and legalities for foreign investors have led to the creation of employment growth and high opportunities. Also, the average salary has increased by 7.8 percent according to Wage Protection System Data. If you are a foreign investor or resident looking to set up business in the UAE. Flyingcolour®  business setup in Dubai helps you in setting up the business. They have 17 years of expertise which ease the process as they take care of everything from scratch from setting up to license, immigration, taxes, and market research without any hassle. Inflation will be a major contributing factor and will fuel the business growth in UAE.