The International Monetary Fund (IMF) anticipates the UAE will maintain a near-term growth rate of approximately 4% in 2025, despite reduced oil production due to OPEC+ agreements. This projection was detailed in an IMF statement following a staff visit to the UAE to assess economic and financial developments and the nation’s policy and reform priorities.
The IMF attributes this sustained growth to robust non-hydrocarbon activities, including tourism, construction, public expenditure and continued expansion in financial services. “Capital inflows remain strong, attracted by social and business-friendly reforms, and contribute to ongoing demand for real estate, which is driving further growth in house prices across different segments and locations,” the statement noted.
Regarding the hydrocarbon sector, the IMF projects a growth exceeding 2% this year, following OPEC+ decisions to maintain production cuts and as the UAE implements a more gradual increase in its OPEC+ quota. Inflation is expected to remain contained at around 2% in 2025 despite higher housing and utilities-related costs.
The IMF also anticipates a decline in hydrocarbon revenue amid volatile oil prices and reduced production. However, it projects that fiscal and external surpluses will remain comfortable, with the fiscal surplus expected to moderate to around 4% of GDP in 2025 from an estimated 5% last year. Non-hydrocarbon revenue is projected to increase steadily in the coming years with the ongoing implementation of the corporate income tax. Public debt is expected to remain contained at around 30% of GDP. The current account surplus is projected at approximately 7.5% of GDP, while international reserves are healthy at over 8.5 months of imports.
The IMF assesses that UAE banks remain adequately capitalised and liquid overall, with asset quality improving in 2024. Robust domestic activity and resilient demand for credit have supported banks’ profitability amid still-elevated interest rates. The Fund highlights that UAE banks’ exposure to the real estate sector has declined by four percentage points to 19.6% during the period from December 2021 to September 2024, and advises that risks associated with continued increases in house prices should continue to be closely monitored.
The IMF commended the UAE’s reform efforts to support medium-term growth and a smooth energy transition, emphasising that prioritisation and sequencing are key to ensuring effective outcomes. “Ongoing infrastructure investments should enhance tourism and domestic activity, while ongoing trade liberalisation, underpinned by Comprehensive Economic Partnership Agreements, should further boost trade and FDI,” the statement read. “Advancing a medium-term fiscal framework would ensure a coordinated national fiscal stance, promote long-term sustainability, and help meet climate change-related challenges. Continued progress in improving economic data collection and dissemination will reinforce these efforts.”
In a related context, the IMF projects a 4% growth rebound in the Middle East and North Africa (MENA) region next year, contingent upon the cessation of oil production cuts and alleviating prevailing conflicts. Growth in the region is expected to be slower at 2.1% in 2024 due to geopolitical and economic challenges, with risks potentially undermining the outlook. The IMF urges acceleration of structural reforms to enhance medium-term growth prospects.
