IMF forecasts strong growth for UAE, expecting around 4% in 2025

The International Monetary Fund (IMF) expected UAE’s near-term growth to remain healthy at around 4 per cent in 2025, despite lower-than-expected oil production related to Opec+ agreements.

This came in a statement issued by the IMF at the conclusion of a staff visit to the UAE to discuss economic and financial developments, the outlook and the country’s policy and reform priorities.

“Near-term growth is strong and expected to remain healthy at around 4 per cent in 2025, despite lower-than-expected oil production related to Opec+ agreements. Non-hydrocarbon activity is boosted by tourism, construction, public expenditure, and continued growth 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. Hydrocarbon GDP is expected to grow above 2.0 per cent this year, following Opec+ decisions to sustain production cuts, and as the UAE implements a more gradual Opec+ quota increase. Inflation is expected to remain contained around 2.0 per cent in 2025 despite higher housing and utilities-related costs,” reads the statement.

The statement expected hydrocarbon revenue to decline amid volatile oil prices and reduced oil production, “but fiscal and external surpluses are projected to remain comfortable. The fiscal surplus is expected to moderate to around 4 per cent of GDP in 2025 from an estimated 5 per cent of GDP last year. However, non-hydrocarbon revenue is projected to increase steadily in the coming years with the ongoing implementation of the corporate income tax. Public debt remains contained at around 30 per cent of GDP.

The current account surplus is projected at around 7.5 per cent of GDP, while international reserves are healthy at over 8.5 months of imports.”

It expected the UAE banks to remain adequately capitalised and liquid overall, “while asset quality further improved in 2024. Robust domestic activity and resilient demand for credit has supported banks’ profitability amid still-elevated interest rates.”

The Fund highlighted that the UAE banks’ exposure to the real estate sector has declined by 4 percentage points to 19.6 during the period December 2021 to September 2024, and risks associated with continued increasing house prices should continue to be closely monitored.

The IMF hailed the UAE reform efforts as supportive of medium-term growth and a smooth energy transition, with prioritisation and sequencing key to ensure 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. 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.”

Meanwhile the Economic Integration Committee held its first meeting for the year 2025 recently, chaired by Abdullah Bin Touq Al Marri, Minister of Economy, and with the presence of Alia Bint Abdulla Al Mazrouei, Minister of State for Entrepreneurship, and directors of all local economic development departments in the country.

The meeting reviewed the Committee’s efforts and achievements in the year 2024 in promoting the growth and diversification of the national economy.

It also assessed the Committee’s contributions to enhancing the competitiveness of the country’s business and investment environment, and to the development of a number of economic legislation and policies in line with global best practices.

Bin Touq said, “The UAE’s economic performance in 2024 is the result of exceptional and concerted efforts that led to substantial progress in our transition towards a new economic model based on innovation and knowledge. As a result, we were able to establish a leading and exemplary economic climate for the success of businesses, investors and startups from around the world.”

He added that these efforts supported the national economy’s growth and competitiveness at the regional and global levels. For instance, the UAE’s non-oil GDP during the first half of 2024 grew by 4.4 per cent compared to the same period in 2023, while non-oil sectors’ contribution to the GDP rose to 75 per cent by the end of H1 of 2024.

Furthermore, Bin Touq emphasised the Committee’s success in enhancing dialogue and coordination with stakeholders at the federal and local levels to promote the competitiveness of the country’s economic legislative system.

This was achieved through the review and development of several laws and national policies in accordance with global best practices, strengthening national efforts to ensure the harmonisation of legislation and regulations, and submitting proposals for the sustainability and growth of national economic sectors and activities.