UAE growth forecast for 2025 and 2026 lowered by Central Bank

27/06/2025 04:23 AST

The Central Bank of UAE (CBUAE) on Thursday revised its GDP growth forecast for the country for 2025 and 2026 by 0.3 per cent due to lower oil prices, slower global economic activity and higher uncertainty.

It projected 4.4 per cent and 5.4 per cent GDP growth for 2025 and 2026 compared to 4.7 per cent and 5.7 per cent it projected in the 2024 annual report, respectively.

Despite slower growth projections, the UAE economy is expected to remain the best-performing in the GCC region this year and the second-fastest next year.

"This revision reflects the effects of slower global economic activity, increased uncertainty and falling oil prices. Despite this revision, the projected growth for 2025 remains higher than that observed in 2024. For 2026, the growth projection has also been revised downward by 0.3 per cent to 5.4 per cent, largely due to weaker external demand and subdued oil prices," it said in its quarterly report.

"Although the outlook remains positive, the growth projections for 2025 and 2026 are surrounded by considerable risks. On the downside, risks stem from unresolved global trade policy uncertainties and the more severe effects of lower oil prices on the non-hydrocarbon sector," it said, adding that the upside potential includes the successful execution of reform agendas combined with diversification strategies, the signing of Comprehensive Economic Partnership Agreements and trade deals, investment projects, and further integration of artificial intelligence, which could enhance the economy's resilience and performance.

S&P Global Market Intelligence on Thursday said it expected the UAE economy to accelerate to 5.4 per cent in 2025 and 6.5 per cent in 2026, supported by the rebound in oil sector output and the strength of domestic demand in the UAE.

"The flipside of the strength of domestic demand, which is reined in partially by restrictive monetary policy, is a gradual acceleration of inflation in 2025 and 2026. Our inflation outlook in 2025 is on a par with the central bank's at 1.9 per cent, but we expect inflation to accelerate to 2.5 per cent as demand remains quite strong," it said in a statement.

The global tariff war between the US and China has significantly impacted investor sentiment, and global think tanks project a slower global economy this year. Similarly, oil prices have been trending lower, trading in the mid-$60s a barrel before the Israel-Iran war this month.

Importantly, the Opec+ also announced increased production recently, which could also put oil under pressure.

However, the UAE economy is more resilient than its regional peers as it is more diversified and less reliant on oil.

For the non-oil sector, the Central Bank forecasts GDP growth of 4.5 per cent and a steady growth rate in 2026.

The UAE economy expanded 4.0 per cent last year, slightly up from its previous growth projection of 3.9 per cent forecast earlier this year. Last year's growth was primarily driven by a 5.0 per cent expansion of non-oil activities and a 1.0 per cent recovery in the hydrocarbon sector.

Khaleej Times