IMF Forecasts UAE’s Economic Resilience: Non-Oil Sectors Propel Growth to 4% in 2025

 The International Monetary Fund (IMF) has projected a robust economic outlook for the United Arab Emirates (UAE) in 2025, with growth expected to reach a healthy 4%. Despite challenges posed by reduced oil production under OPEC+ agreements, the UAE’s diversified economy continues to thrive, driven by strong performance across its non-hydrocarbon sectors.

Diversified Sectors Bolster Economic Expansion

The IMF attributed the UAE’s economic strength to its vibrant non-oil sectors, including:

• Tourism: A cornerstone of the UAE’s growth strategy, attracting global visitors to its world-class destinations.
• Construction: Rapid infrastructure development fuels domestic economic activity.
• Public Spending: Government investments play a crucial role in supporting the economy.
• Financial Services: A dynamic and growing contributor to non-oil GDP.

These sectors, along with strong capital inflows driven by pro-business reforms, have fueled real estate demand, boosting property prices and further stimulating economic activity.

Oil Sector and Inflation Projections

Although hydrocarbon GDP is expected to grow modestly by over 2% in 2025 due to gradual quota increases under OPEC+, non-hydrocarbon growth ensures overall economic resilience. Inflation is projected to remain contained at around 2%, despite rising housing and utility costs, signaling stability in consumer prices.

Fiscal and External Surpluses Provide Stability

The IMF highlighted the UAE’s ability to maintain fiscal and external surpluses despite fluctuating oil revenues:

• Fiscal Surplus: Expected to moderate to 4% of GDP in 2025, supported by rising non-hydrocarbon revenue from corporate tax reforms.
• Current Account Surplus: Projected at 7.5% of GDP, underscoring external financial strength.
• International Reserves: Robust, covering over 8.5 months of imports.

Public debt remains manageable, estimated at around 30% of GDP, reflecting the UAE’s fiscal discipline.

Banking Sector Remains Resilient

The UAE banking sector is expected to remain strong, with adequate capitalisation and liquidity levels. Asset quality improvements and robust domestic credit demand have bolstered profitability. Additionally, the sector’s exposure to real estate has decreased, mitigating risks associated with rising property prices.

Reforms Drive Medium-Term Growth and Sustainability

The IMF praised the UAE’s ambitious reform agenda, which supports long-term growth and sustainability:

• Infrastructure Investments: Enhancing tourism and economic activity.
• Trade Agreements: Comprehensive Economic Partnership Agreements (CEPAs) boosting trade and foreign investment.
• Energy Transition: Continued focus on renewable energy and climate action initiatives.

The Fund also emphasized the importance of a medium-term fiscal framework to ensure fiscal sustainability and effective climate change adaptation.

A Visionary Path to Economic Resilience

The UAE’s commitment to economic diversification, sustainability, and pro-business reforms has positioned it as a model of resilience and adaptability. By leveraging its strengths and embracing innovation, the UAE is set to achieve sustained growth and prosperity, underscoring its role as a global economic leader.