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.