Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
The UAE’s economy is projected to grow by 4.9% in 2025, up from the 4.4% estimate published in June, according to the Central Bank of the UAE’s (CBUAE) latest Quarterly Economic Review. Growth momentum is expected to accelerate further to 5.3% in 2026. Real GDP expansion in 2024 was 4.0%.
In the first quarter of 2025, real GDP rose by 3.9% year-on-year, driven by a 5.3% increase in non-hydrocarbon activity. Manufacturing, financial services, construction and real estate were the key contributors to non-hydrocarbon growth. The non-hydrocarbon sector is forecast to expand by 4.5% in 2025 and 4.8% in 2026, while hydrocarbon GDP is projected to grow by 5.8% in 2025 and 6.5% in 2026 following the upward revision of OPEC+ production quotas.
Inflation in the UAE eased to 0.6% in the second quarter of 2025, compared with 1.4% in the first quarter, as lower energy and food costs outweighed continued increases in housing. The central bank revised its 2025 inflation forecast down to 1.5% from 1.9%, while projecting a moderate rise to 1.8% in 2026.
The residential property market remained robust in the first five months of the year, with sales transactions rising 13.7%. Off-plan sales grew 14.3%, while ready homes rose 12.5%. However, Abu Dhabi prices softened—down 3.6% for apartments and 10.1% for villas—while Dubai recorded gains, with villas up 13% and apartments up 2.1%. Rental transactions declined by 4.2% across Abu Dhabi and Dubai, though rents continued to rise, particularly in Dubai where apartment rents climbed 11.5% and villa rents 13.7%.
Tourism also reinforced non-oil growth. Dubai welcomed 9.9 million international visitors in the first half of 2025, up 6.1% from a year earlier, while hotel occupancy reached 81% in June. Passenger traffic through Dubai International Airport hit a record 46 million in six months, while Abu Dhabi airports handled 15.8 million passengers, up 13.1%.
The UAE banking sector continued to expand, with total assets reaching Dh4.97 trillion at end-June, up 15.4% year-on-year. Loans grew 11.1% and deposits rose 13.1%, led by strong growth in corporate and retail segments. Asset quality improved further, with the net non-performing loan ratio declining to 1.7%. Banks maintained a capital adequacy ratio of 17.3%, comfortably above regulatory requirements.
The Abu Dhabi Securities Market General Index rose 8.1% year-on-year in the second quarter of 2025, with market capitalisation averaging Dh3.0 trillion, supported by gains in major listed companies. The Dubai Financial Market General Index surged 35.6% over the same period, with market capitalisation averaging Dh953.0 billion, driven largely by the listing of Dubai Residential REIT.
