The UAE’s gross domestic product (GDP) is expected to reach 3.3 percent in 2024 and 4.1 percent in 2025 and 2026, according to the World Bank’s latest semi-annual MENA Economic Update.
The report attributed next year’s growth to the recovery in oil production and stable external conditions. Meanwhile, it attributed this year’s GDP expansion to a 4.1 percent growth in the UAE’s non-oil sector, which remains a key driver of economic growth through tourism, real estate, construction, transportation, and manufacturing.
The World Bank also expects oil output to grow by 1.2 percent in 2024, with voluntary production cuts expected to be gradually reversed, leading to a phased increase in output between January and September 2025.
Inflation to reach 2.2 percent
The UAE’s inflation rate averaged 2.3 percent in H1 2024, with Dubai’s inflation, consistent with the national trend, reaching 3.9 percent. In 2024, the World Bank expects the UAE’s inflation to reach 2.2 percent and decline to approximately 2.1 percent through 2025-2026.
The report also expects fiscal surplus to continue its declining trajectory to 4.9 and 4.7 percent of GDP in 2024 and 2025, respectively. The expansion of non-oil revenues and the broadening of the tax base continue to play a central role. The ongoing implementation of fiscal revenue reforms, along with the maintenance of prudent and well-coordinated fiscal policies will likely continue to support overall fiscal sustainability.
The World Bank also expects the UAE’s current account surplus to reach 7.5 percent of GDP for 2024, and 7.4 and 7.3 percent in 2025 and 2026, respectively, indicating a deterioration, despite efforts to diversify the external sector.
Expansion into non-oil sectors and emerging markets in South Asia and East Africa will likely strengthen non-oil export revenues. However, export performance remains subject to fluctuations in the oil production level and price and is dependent on the re-establishment of secure trade corridors.
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Key challenges remain
The potential increase in oil output between January and September 2025 will likely support the UAE’s GDP growth next year, reinforcing external buffers and sustaining fiscal stability.
Hydrocarbon revenues continue to underpin the fiscal framework, while ongoing structural reforms including the introduction of Corporate Income Tax and the gradual phase-out of the business fee regime are enhancing fiscal resilience and broadening the economic base. These reforms, alongside the country’s strong non-oil sector performance, provide a stable foundation for economic strength.
However, the UAE still faces key risks to GDP growth including the potential OPEC+ decisions to extend production quotas cuts, as well as the extension or escalation of the conflict in the Middle East.
Regional tensions cause oil price volatility and disruption in key sectors, notably tourism and trade. In addition, disruptions of Red Sea trade routes would lead to further increases in shipping costs and rerouting, particularly affecting the Asia-Europe trade corridor.
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