A. SREENIVASA REDDY (ABU DHABI)
The Central Bank of the UAE (CBUAE) has projected the UAE’s real GDP growth at 1.7% in 2026 before accelerating sharply to 9.8% in 2027, supported by the expected normalisation and step-up in hydrocarbon output and sustained growth in non-hydrocarbon activity.
In its latest Quarterly Economic Review, the CBUAE said the 2026 forecast reflects temporary moderation in both hydrocarbon and non-hydrocarbon sectors amid external developments and regional trade-route uncertainty.
The CBUAE said the UAE economy remained resilient in 2025, with real GDP growing by 6.2%, adding that external developments have increased uncertainty around the 2026 outlook. However, backed by strong fiscal and external buffers, the economy is expected to continue expanding, supported by substantial policy measures, including the CBUAE Financial Resilience Package, Dubai’s Dh2.5 billion business support package, an expansionary infrastructure-focused budget and potential sector-specific contingency support measures.
Resilient public investment and ongoing diversification projects are expected to partly offset temporary moderation in trade, tourism activity and private-sector sentiment in 2026, the report said.
In the hydrocarbon sector, the report said strong increases in oil production in the third and fourth quarters of 2025, by 10.5% and 16.6%, respectively, helped hydrocarbon GDP grow by 4.3% in 2025. However, temporary regional maritime-route disruptions in March and April 2026 were associated with lower oil production, and output was down 8% year-on-year over the first four months of 2026, averaging 2.68 million barrels per day, the report said.
The CBUAE said economic activity in the UAE’s non-hydrocarbon private sector remained expansionary in April 2026, with the Purchasing Managers’ Index easing to 52.1 from 52.9 in March, but staying above the neutral 50 threshold. In Dubai, business activity moderated, with the PMI declining to 51.6 in April from 53.2 in the previous month.
On inflation, the CBUAE forecast UAE inflation at 2.3% in 2026, reflecting supply-side factors linked to regional geopolitical developments and their impact on energy, shipping and food prices.
“UAE inflation is expected to remain moderate and below global averages, supported by housing-cost dynamics and the government’s regulation of staple food items,” the report said.
For 2027, inflation is projected at 1.9%, as easing supply-side conditions and lower energy prices are expected to help balance domestic demand, with government measures continuing to support price stability.
The report said Abu Dhabi’s consumer price inflation averaged 1.4% year-on-year in January-February 2026, while Dubai’s inflation averaged 3.7% year-on-year in January-April 2026, driven primarily by housing-related costs.
In Abu Dhabi, the housing, water, electricity, gas and other utilities component rose by 4.7% year-on-year, partly offset by a 4.6% decline in transportation costs. In Dubai, the housing component rose by 7.4% year-on-year, while transportation and food and beverage prices increased by 2.9% and 4.0%, respectively.