UAE stands out with a balanced budget amid regional deficits

21/05/2025 02:19 AST

The UAE, showcasing its economic resilience and strategic diversification, stands out as the only GCC state projected to achieve a balanced budget as other member countries face fiscal challenges in 2025 due to oil production cuts.

While other GCC nations grapple with widening deficits due to oil production cuts and volatile crude prices, the UAE's prudent fiscal planning and robust non-oil sectors position it as a regional leader, according to analysts.

This stability, underpinned by significant investments in social development, infrastructure, and economic diversification, reinforces UAE's role as a global financial hub and bolsters confidence in its economic outlook.

According to a Kamco Invest report, the GCC's aggregate budgeted expenditure for 2025 is estimated at $545.3 billion, a slight decline from $554.9 billion in 2024. Budgeted revenues, however, are projected to fall by 3.1 per cent to $488.4 billion, down from $504.1 billion last year, primarily due to oil output cuts by GCC OPEC members. This results in an anticipated regional fiscal deficit of $56.9 billion, up from $50.8 billion in 2024.

Most GCC budgets assume a conservative crude oil price of $60 per barrel, though Saudi Arabia, the UAE, and Bahrain have not disclosed their specific oil price assumptions.

The UAE's 2025 federal budget, approved at Dh71.5 billion ($19.5 billion) for both expenditure and revenue, reflects an 11.6 per cent increase in spending and an 8.8 per cent rise in revenue compared to 2024. The budget allocates Dh27.9 billion (39 per cent) to social development and pensions, Dh25.6 billion (36 per cent) to government affairs, Dh2.6 billion (4.0 per cent) to infrastructure and economic resources, Dh2.9 billion (4.0 per cent) to financial investments, and Dh12.6 billion (18 per cent) to other federal expenses. This focus on social welfare, education, and infrastructure underscores the UAE's commitment to enhancing quality of life and fostering sustainable growth.

While Saudi Arabia dominates GCC budgeted revenues (65.5 per cent) and expenditure (63.6 per cent), the UAE's project market is a key growth driver. According to Meed Projects, the GCC's upcoming contracts total $1.54 trillion as of April 2025, with the UAE contributing $312.3 billion, second only to Saudi Arabia's $801.2 billion. Dubai's infrastructure projects, including expansions in logistics and renewable energy, align with the UAE's vision to reduce oil dependency, as outlined in its Vision 2030 strategy.

Global oil market dynamics add complexity to the GCC's fiscal outlook. Crude oil prices, which peaked above $80 per barrel early in 2025, fell below $60 per barrel by April due to US tariffs on China and other trading partners, according to Bloomberg data.

The International Energy Agency (IEA) revised its 2025 oil demand growth forecast downward by 0.3 million barrels per day (mb/d) to 0.73 mb/d, while OPEC adjusted its estimate by 0.15 mb/d to 1.28 mb/d, citing trade tensions and a weaker global economic outlook. The average oil price for 2025 is now projected at $69.6 per barrel, down from $71.0 per barrel earlier this year, per IEA estimates.

Despite these challenges, the UAE's diversified economy mitigates the impact of oil price volatility. Non-oil sectors, including tourism, finance, and technology, contributed 73 per cent to the UAE's GDP in 2024, according to the UAE Central Bank. Dubai's financial hub status and investments in innovation, such as the Dubai Future District, attract global capital, cushioning the emirate against oil revenue fluctuations. The UAE's ability to breakeven in 2025, while other GCC nations face deficits, highlights its fiscal discipline and strategic foresight.

The GCC's expansionary budgets prioritise healthcare, education, and infrastructure, but the UAE's balanced approach sets it apart. By channelling funds into social welfare and economic diversification, the UAE not only sustains domestic growth but also enhances its global appeal as a stable investment destination, economists said. "As oil prices remain uncertain, the UAE's resilience offers a model for the region, with Dubai poised to lead the GCC's economic transformation in 2025 and beyond."

Khaleej Times