Today's Edition
A.SREENIVASA REDDY (ABU DHABI)
The UAE’s real GDP is expected to grow by 4.4% in 2025, accelerating to 5.4% in 2026, according to the Central Bank of the UAE’s (CBUAE) latest Quarterly Economic Review. This growth trajectory is supported by the resilience of the non-hydrocarbon sector and a rebound in oil and gas output aligned with updated OPEC+ production plans.
The CBUAE forecasts non-hydrocarbon GDP to expand steadily by 4.5% in both 2025 and 2026, underpinned by the country’s strategic drive to attract foreign investment, support innovation, and advance key sectors such as manufacturing, tourism, transport, and the digital economy.
On the hydrocarbon side, growth is forecast at 4.1% in 2025, followed by a sharper 8.1% expansion in 2026, reflecting anticipated increases in oil output as OPEC+ production quotas are gradually relaxed and new upstream and midstream projects take hold.
This marks a significant turnaround from 2024, when oil GDP grew by just 1.0%, dragging overall GDP growth to 4.0% despite a 5.0% rise in non-oil activities.
Although the central bank has marginally revised down its earlier growth forecasts—by 0.3 percentage points for both years—citing softer global economic activity, lower oil prices, and increased uncertainty, the outlook remains solidly upbeat.
Supporting this assessment, Ralf Wiegert, Head of MENA Economics at S&P Global Market Intelligence, said, “The UAE economy is still expected to gain momentum. We forecast real GDP growth to reach 5.4% in 2025 and 6.5% in 2026. This will be driven by the oil sector's recovery and the strength of domestic demand.”
Wiegert also emphasised the UAE’s capacity to weather external shocks, adding, “Domestic demand in the UAE remains strong and is underpinning broader economic stability. The oil rebound adds a strong layer of support to the overall growth story.”
On the inflation front, the CBUAE reported an average rate of 1.4% in Q1 2025, driven mainly by lower transportation costs and easing energy prices. Abu Dhabi's inflation rate was 0.5%, and Dubai's inflation rate was 3.1% for the first quarter of 2025, the CBUAE report noted.
Full-year inflation is now forecast at 1.9% for both 2025 and 2026—a slight downward revision from earlier estimates. While housing costs have edged higher, rising by 3.9% year-on-year in Q1, food and beverage inflation cooled to just 0.4% amid softening global commodity prices.
S&P Global Market Intelligence broadly concurs with the central bank’s inflation projections, though it expects a gradual increase over time.
“Our inflation outlook for 2025 matches the central bank’s at 1.9%, but we anticipate a moderate acceleration to 2.5% in 2026 due to sustained domestic demand,” Wiegert noted.
Despite risks tied to global trade policy uncertainty and oil price volatility, the CBUAE’s report also identifies upside potential in the successful implementation of economic reforms, new trade agreements, and the growing role of artificial intelligence in enhancing productivity and competitiveness.
