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UAE’s Economic Growth Projected To Stay Strong At 4% In 2025, IMF Reports

by THEFUTURE.TEAM

January 24, 2025

The International Monetary Fund (IMF) has forecast that the UAE will continue to experience robust economic growth, estimating a steady 4% growth in 2025 despite a dip in oil production.

Non-Oil Sector Driving Growth

The IMF highlights that the UAE’s non-hydrocarbon sectors, notably tourism, construction, public spending, and financial services, are propelling this growth. These industries are expected to remain key contributors to the country’s economic momentum in the near future.

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Following a recent staff visit to the UAE, the IMF issued a statement discussing the country’s economic outlook, financial developments, and policy priorities. The UAE’s non-oil sector showed impressive performance, as evidenced by a notable rise in the S&P Global UAE Purchasing Managers’ Index (PMI), which hit a nine-month high of 55.4 in December, up from 54.2 in November.

Oil Sector And Inflation Outlook

Despite challenges in oil production, the IMF predicts a 2% growth in the oil sector, influenced by OPEC+ production cuts and the UAE’s cautious approach to increasing its OPEC+ production quota.

Inflation in the UAE is expected to remain manageable at around 2% in 2025, even with rising costs in housing and utilities. The IMF anticipates that capital inflows will continue to be strong, fueled by the country’s pro-business reforms, which should keep demand for real estate high and support price growth across various property segments.

Fiscal And Current Account Surpluses

The IMF projects a slight easing of the UAE’s fiscal surplus, predicting it will decrease to 4% of GDP in 2025, down from an estimated 5% last year. The current account surplus, however, is forecast to remain strong at about 7.5% of GDP. With international reserves still solid, the UAE is well-positioned to cover more than eight and a half months’ worth of imports.

Revenue Outlook

Despite the ongoing volatility in global oil prices, the IMF expects a decline in hydrocarbon revenue, alongside steady growth in non-oil revenues. The country’s implementation of a corporate income tax is expected to provide a consistent revenue stream in the coming years.

In its report, the IMF commended the UAE’s reform initiatives, noting that they play a crucial role in ensuring sustainable medium-term growth while also facilitating the country’s energy transition. The IMF emphasized the importance of a well-planned and sequenced approach to ensure the success of these reforms.

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Cyprus Inflation Climbs To 4% In June As Euro Area Price Growth Moderates

Cyprus’ annual inflation accelerated to an estimated 4% in June 2026, widening the gap with the euro area, where price growth continued to ease, according to flash estimates released on Tuesday by Eurostat.

Domestic Prices Move Higher

Consumer prices in Cyprus increased by 0.8% compared with May, based on the Harmonised Index of Consumer Prices (HICP), as inflationary pressures gathered pace across the domestic economy.

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That contrasted with the broader euro area, where annual inflation is estimated to have slowed to 2.8% in June from 3.2% in May, extending the bloc’s gradual disinflation trend.

Cyprus Moves Further Above The Euro Area Average

The latest figures leave Cyprus well above the euro area’s average inflation rate, highlighting a divergence between domestic price developments and those across the single currency bloc. While inflation continued to moderate in much of the eurozone, price growth accelerated on the island.

Across the euro area, energy remained the largest contributor to inflation, posting an annual increase of 8.7% in June. Although still elevated, that represented a slowdown from 10.8% in May.

Services inflation also eased, falling to 3.2% from 3.5% a month earlier.

Food And Industrial Goods Show Softer Growth

Price growth moderated in several other categories as well. Inflation for food, alcohol and tobacco slowed to 1.6% from 1.9% in May, while non-energy industrial goods remained unchanged at 0.9%.

A Sharp Reversal From Spring

June’s reading marks a notable shift from earlier in the year. In March, Cyprus recorded one of the lowest inflation rates in the European Union at 1.5%, reflecting relatively subdued price pressures at the time.

Since then, inflation has accelerated as the impact of the conflict in the Middle East and Gulf region, particularly through higher energy costs, has become increasingly visible in consumer prices.

With annual inflation now reaching 4%, Cyprus has moved well above the euro area average, suggesting that imported cost pressures are playing a growing role in domestic inflation.