The GCC states will outperform the global economy in 2024 according to First Abu Dhabi Bank PJSC (FAB), the UAE's biggest lender by assets.

The GCC states will continue to be supported by strong growth in non-oil GDP with 3.4% expected in the medium term as economic diversification continues, FAB said in its Global Investment Outlook for 2024.

However, the outlook recommends investors diversify the asset allocation in their portfolios as market and economic volatility looks likely to continue in 2024 and build a defensive portfolio to provide flexibility.

Tailwinds such as higher fiscal spending, rapid disinflation and a tight labour market are so far supporting consumption and spending and lifting global equity markets, FAB said, adding that the delayed impact of monetary policy decisions could soon take effect until interest rates and inflation come down.

Michel Longhini, group head of FAB global private banking, said: “Investors will need to remain cautious given the rise and heightened levels of interest rates which will continue to impact economies and geopolitical risks which could increase volatility.”

Global economic growth is expected to slow down in 2024, however, regional markets look resilient, he said.

FAB sees the growth of 3.7% in 2023 for the UAE and forecasts 4% in 2024, and the GCC’s by 3.4% in 2024, which is higher than the IMF’s global forecast of 3.1% and 2.1% for the United States in 2024.

MENA markets provide ‘interesting opportunities’ in the ESG space, the bank said, along with diversification benefits for global portfolios.

The report said the five key risks for 2024 are artificial intelligence (AI) the US elections, tensions in the Middle East and Africa, climate change, and US-China relations.

(Reporting by Imogen Lillywhite; editing by Daniel Luiz)