Today's Edition
A.SREENIAVSA REDDY (ABU DHABI)
The UAE economy is projected to expand by 4.8% in 2025, according to the latest edition of the Gulf Economic Update (GEU) issued by the World Bank Group. Medium-term prospects remain favourable, with overall GDP growth expected to average 5% in 2026–2027, the report said.
“The country stands out for its diversified economy, with balanced growth between non-oil and oil sectors,” the GEU report noted.
The report said the UAE continues to demonstrate a high and stable level of diversification, with non-oil GDP reaching 77.8% of GDP in 2024, supported by strong performance in trade, tourism and real estate.
According to the report, economic growth remained robust at 3.9% year-on-year in Q1-2025, driven by a 5.3% expansion in non-oil activities. The GEU identifies manufacturing and financial and insurance services as the two largest contributors to Q1 growth, each accounting for 0.8 percentage points of GDP, followed by construction contributing 0.6 percentage points.
The World Bank expects non-oil activities to expand by 5.2% on average in 2026–2027, underpinning medium-term growth. Oil sector growth is projected to recover to 3.9% in 2025 and rise further to an average of 4.5% in 2026–2027, as production increases under the OPEC+ framework.
Labour market indicators also remain favourable. The GEU highlights that unemployment in the UAE is estimated at 2.1% in 2025, below the GCC average, and that the employment-to-population ratio is expected to reach 76.2%.
Inflation is projected to remain stable at 2% in 2026–2027. Between January and July 2025, price increases were most notable in recreation and culture (6% year-on-year), insurance and financial services (4.4%), and housing, water, electricity and gas (4%), while transport costs declined by 6.2%.
The country’s fiscal indicators remain strong. The report projects the UAE’s fiscal balance to remain stable, averaging a surplus of 5% of GDP in the medium term. “The UAE’s comfortable fiscal position is underscored by the strength and scale of its sovereign wealth funds (SWFs), which rank among the largest globally, providing substantial fiscal buffers,” the GEU said.
The report also highlighted that, supported by lower global interest rates, Abu Dhabi issued $2 billion in 10-year debt at a historically low premium as financing conditions improved following US Federal Reserve rate cuts.
Foreign direct investment continues to be a major strength for the UAE. The latest available data, the report said, showed the country attracted $45.6 billion in FDI inflows in 2024, making it the leading destination relative to the size of its economy among GCC states. The GEU attributes this to business-friendly regulations, political and economic stability and policies targeting high-value non-oil sectors.
“This attractiveness is supported by ambitious government policies supporting investments in non-oil, high-value sectors such as AI, cybersecurity, and cloud computing,” the report said. It added that the UAE also benefits from investor-friendly visa rules and active efforts to attract global talent.
The GEU underscored that the UAE remains one of the GCC’s leaders in digital transformation, advanced telecom infrastructure and AI adoption, supported by high levels of venture capital, strong government digitalisation programmes and an expanding data-centre ecosystem.
The World Bank projections for the UAE are in line with the International Monetary Fund’s October World Economic Outlook, which forecast 4.8% growth for 2025 and 5% for 2026.
As for the other GCC nations, the World Bank report said Saudi Arabia is expected to grow 3.8% in 2025, Bahrain 3.5%, Oman 3.1%, Qatar 2.8% and Kuwait 2.7%.
