A. SREENIVASA REDDY (ABU DHABI)
The UAE economy is expected to recover strongly in 2027, with ICAEW, a global professional body for chartered accountants, forecasting growth of 6.6%.
The recovery is expected to be supported by a rebound in energy exports, non-oil activity and travel and tourism as the disruption caused by the regional conflict gradually eases.
ICAEW expects travel and tourism to recover strongly in 2027, although activity is unlikely to return fully to pre-conflict levels before 2028.
In the UAE, where tourism contributes about 13% of gross domestic product, visitor numbers are forecast to rebound by 30% in 2027 and a further 59% in 2028, following a projected decline of 46.7% this year.
However, ICAEW said risks to its tourism forecast were tilted to the downside because its projections did not fully incorporate the implications of renewed hostilities, which could continue to affect demand for another nine to 12 months.
Non-oil activity is also expected to regain momentum despite lingering geopolitical uncertainty.
The UAE’s non-oil private sector reported a substantial rise in new business in August, with the seasonally adjusted S&P Global UAE Purchasing Managers’ Index rising to 55.3 from 52.7 in July. A reading above 50 indicates an expansion in business activity.
ICAEW said purchasing managers’ indices for the UAE and Kuwait pointed to a recovery in non-oil activity despite continued uncertainty.
The report said improving consumer confidence and easing price pressures would support the broader recovery in non-oil sectors. Across the GCC, non-energy activity is forecast to expand by 3.3% in 2027 after a projected contraction of 1.9% this year.
The regional recovery nevertheless depends heavily on at least a partial normalisation of shipping through key waterways. ICAEW’s baseline forecast assumes that trade and energy flows will gradually recover during 2027 but remain below pre-conflict levels for some time.
Travel and tourism have been among the sectors most exposed to the disruption. The weakness in these industries has also created spare labour capacity in hospitality and transport, limiting near-term wage pressures, the report said. Labour demand is expected to strengthen as GCC economies recover.
ICAEW expects inflation across the GCC to average 2.1% in 2027, down from a projected 2.5% this year. Supply-chain disruption and higher shipping and insurance costs are expected to keep price pressures elevated in the coming months before they begin to ease.
Food and beverage prices have been the largest contributor to GCC inflation this year. Price controls have helped contain increases in essential goods, while prices of many imported non-essential products have risen more rapidly, the report said.
ICAEW forecast the wider Middle East economy to grow 5.3% in 2027 after contracting by an estimated 6.3% this year. The forecast covers the broader Middle East and is separate from its projection for the six GCC economies.
The GCC economy is forecast to expand by 5.8% in 2027, following a projected contraction of 6.4% in 2026. The rebound will partly reflect a favourable comparison with this year’s depressed activity, alongside an expected recovery in energy production and exports.
The GCC hydrocarbon sector is projected to expand by 25.9% in 2027 after contracting by 26.9% this year.
Among individual GCC economies, Qatar is forecast to record the region’s fastest growth at 11.5% in 2027 following a much weaker performance this year. ICAEW said Qatar’s dependence on the Strait of Hormuz for energy exports had made it particularly vulnerable to the current disruption.
Saudi Arabia’s economy is forecast to grow by 4.7% in 2027 after contracting by 4.6% this year. The expected turnaround primarily reflects a gradual normalisation of its oil sector following disruptions to energy exports.
ICAEW stands for the Institute of Chartered Accountants in England and Wales. Incorporated by Royal Charter and headquartered in London, it is a professional membership organisation for chartered accountants.
Despite its name, ICAEW operates internationally, including in the Middle East. Its quarterly Middle East Economic Update is prepared for the finance profession.