Today's Edition
MAIS IBRAHIM (ABU DHABI)
The UAE's economic growth is expected to accelerate to 5.0% in 2025, propelled by steady expansion in both the oil and non-oil sectors, according to a recent research note from Emirates NBD.
Despite the extended OPEC+ production cuts, Emirates NBD maintains its forecast for a modest increase in oil production later in the year. Base effects are also expected to favour growth through the first half of 2025, ensuring a stable economic outlook.
According to the research note, the non-oil sector remains a key driver of economic optimism.
"The Central Bank of the UAE has begun cutting interest rates in tandem with the US Federal Reserve, and we anticipate a further three cuts next year which should be supportive of activity in the private sector, from both households and businesses," it stated.
Major infrastructure projects, including the Etihad Rail Network, Abu Dhabi metro, Al Maktoum Airport, and Dubai's Blue metro line, are also moving forward, underpinned by significant public investment.
"FDI inflows remain strong, and while population growth may slow from the pace seen over the past several years, government targets and ongoing reform initiatives should continue to encourage an inflow of new arrivals," the note said.
Although the potential for a global trade war under a second Trump presidency could pose a risk to the logistics sector, Emirates NBD maintains that the UAE's extensive trade deals offer a buffer against external shocks.
The UAE recorded a 3.6% year-on-year GDP growth in the first half of 2024, with second-quarter growth accelerating to 3.9% compared to 3.4% in the first quarter, according to preliminary data from the Federal Competitiveness and Statistics Authority (FCSA).
Notably, the non-oil economy continued to outpace the oil sector, expanding by 4.8% in Q2, up from 4.0% in Q1, the research note showed.
In contrast, oil sector growth remained modest, at 1.2% in Q2, reflecting the ongoing impact of OPEC+ production cuts. However, this marked an improvement from the 3.1% contraction seen in 2023.
"As a result, the non-oil economy accounted for a historically high 74.9% of GDP in the second quarter, testament also to ongoing diversification efforts and the growth of new and established non-oil sectors," the note added.
The travel and tourism sectors continued to power non-oil growth in Q2, according to Emirates NBD's research note.
The UAE's transport and storage industry was the fastest-growing component of the UAE's GDP, posting a 9.3% growth in Q2, following 7.3% in Q1.
The logistics sector also saw growth, with Jebel Ali Port's container throughput rising 3.9% year-on-year to 7.3 million TEUs in H1. Meanwhile, the accommodation and food services sector expanded by 5.8% in Q2.
Wholesale and retail trade, the largest non-oil sector, grew by 2.8% in Q2, while financial services grew by 7.2%, and manufacturing expanded by 2.4%, driven by government-led initiatives to boost industrial output.
