The UAE is expected to maintain strong near-term growth at around 4% in 2025, despite reduced oil output under OPEC+ agreements, according to the International Monetary Fund (IMF). This forecast follows an IMF staff visit to review the nation’s economic outlook, policy priorities, and reforms.
“Near-term growth is strong and expected to remain healthy at around 4% in 2025, despite lower-than-expected oil production related to OPEC+ agreements. Non-hydrocarbon activity is boosted by tourism, construction, public expenditure, and continued growth in financial services,” the IMF stated.
The report highlighted strong capital inflows driven by reforms that support business and investment, contributing to increased demand for real estate. As a result, property prices continue to rise across various markets. Hydrocarbon GDP is expected to exceed 2% growth in 2024, as the UAE gradually increases its OPEC+ production quota. Inflation, however, is projected to remain stable at 2% in 2025, despite rising housing and utility costs.
While volatile oil prices and reduced production may lower hydrocarbon revenues, the IMF expects fiscal and external surpluses to remain strong. The fiscal surplus is forecasted to decrease slightly to 4% of GDP in 2025 from 5% in 2024, but non-oil revenue will likely increase due to corporate income tax implementation. Public debt remains manageable at around 30% of GDP, and the current account surplus is projected at 7.5% of GDP, with international reserves exceeding eight months of import coverage.
UAE banks are also expected to maintain robust capital and liquidity, supported by strong domestic activity and credit demand. Real estate exposure in banking portfolios has decreased by 4 percentage points since December 2021 to 19.6%, aligning with efforts to manage risks linked to rising property prices.
The IMF commended the UAE’s reform initiatives for supporting long-term growth and facilitating a smooth energy transition. “Ongoing infrastructure investments should enhance tourism and domestic activity, while ongoing trade liberalization, underpinned by Comprehensive Economic Partnership Agreements, should further boost trade and FDI,” the IMF added. Advancing fiscal frameworks and improving data transparency were also highlighted as critical for sustainability and climate-related goals.
In related developments, the UAE’s Economic Integration Committee held its first meeting of 2025, chaired by Abdullah Bin Touq Al Marri, Minister of Economy. The meeting, attended by Alia Bint Abdulla Al Mazrouei, Minister of State for Entrepreneurship, and key economic officials, reviewed achievements in 2024 aimed at enhancing national economic growth and diversification.
Bin Touq emphasized the significance of innovation in shaping the UAE’s new economic model. “The UAE’s economic performance in 2024 is the result of exceptional and concerted efforts that led to substantial progress in our transition towards a new economic model based on innovation and knowledge. As a result, we were able to establish a leading and exemplary economic climate for the success of businesses, investors, and startups from around the world,” he said.
He noted that non-oil GDP grew by 4.4% in the first half of 2024, with non-oil sectors contributing 75% of GDP by mid-year. Bin Touq also highlighted the Committee’s success in improving economic legislation through collaboration with federal and local stakeholders, enhancing the business environment’s competitiveness in line with global standards.
These efforts aim to sustain growth and ensure the continued development of key sectors within the UAE’s economy.
Article reference: Gulf Today.
