23 December 2024

UAE Economy: 2025 GDP Growth Projections and Regional Development Dynamics

Table of content

UAE GDP Growth Forecast for 2025

According to World Bank projections, the United Arab Emirates (UAE) economy is expected to achieve GDP growth of 4.1% in 2025. Key drivers of this growth include a recovery in the oil sector and sustained expansion in non-oil industries such as tourism, real estate, construction, transportation, and manufacturing.

Other forecasts also highlight optimistic growth dynamics:

  1. Central Bank of the UAE (CBUAE): 6.2% GDP growth.
  2. International Monetary Fund (IMF): 5.1%.

Strengths of the Non-Oil Sector

Despite temporary fluctuations in the oil sector, non-oil industries remain the primary contributors to growth. In 2024, these sectors grew by 4.1%, driven by an increase in tourism, housing demand, and active construction projects. As of October 2024, residential property transactions reached 140,000 units, marking a 36% year-on-year increase.

Sustainability strategies and artificial intelligence initiatives, such as the “Sandbox Dubai” program, further foster innovation and strengthen the UAE’s position as a global technology hub.

Inflation and Monetary Policy

Inflation in the UAE continues to decline, reaching 2.4% in October 2024—the lowest level since August 2023. Anticipated monetary easing, driven by the US Federal Reserve’s rate cuts and mirrored by the CBUAE, is expected to further support economic growth.

GCC Regional Trends

The Gulf Cooperation Council (GCC) region is projected to see 4.2% growth in 2025-2026, following a moderate 1.6% growth in 2024, according to the World Bank.

  1. Saudi Arabia: Growth is expected to accelerate to 4.7% in 2025-2026 after a modest 1.1% in 2024 due to voluntary oil production cuts.
  2. Qatar: Growth is forecasted at 4.1%, driven by increased gas production capacity and a strong non-oil sector.
  3. Kuwait: A short-term contraction of 1% is projected in 2024.
  4. Bahrain and Oman: Growth forecasts are 3.3% and 3.0%, respectively.

Regional inflation remains low at 2.1%, supported by subsidy programs, fuel price caps, and currency pegs. However, housing market pressures persist in several countries.

Conclusion

The UAE and GCC economies demonstrate resilience amidst global challenges. Continued diversification policies, the development of high-tech industries, and reduced inflationary pressures create promising prospects for long-term growth and investment opportunities.