The United Arab Emirates is set to maintain its status as the fastest-growing economy in the Gulf region this year, driven by strong oil production and a thriving non-oil sector, according to Capital Economics.
Even though the UAE has adhered to OPEC+ guidelines, keeping oil output steady at 2.9 million barrels per day (bpd) during January and February, the country is still expected to experience a broad economic recovery.
The non-oil sector is the main engine behind the UAE’s economic growth, with private sector credit growth increasing from 7.5% year-on-year in November to 8.0% in December. This uptick is largely fuelled by a notable rise in personal loans for consumption, Investing.com reports.
In addition, the Dubai International Financial Centre saw a record number of new companies established in 2024.
Public parking data also shows an all-time high utilisation rate of 28.3%, pointing to increased foot traffic.
Meanwhile, Dubai set a new record for foreign visitor arrivals in 2024, reaching 18.7 million, with signs that this positive trend will continue into 2025.
However, the Purchasing Managers’ Index (PMI) surveys for Dubai and the UAE in February suggest a possible slowdown in non-oil GDP growth during the first quarter.
Despite this, the UAE is poised to benefit from OPEC+'s decision to ramp up oil production beginning on 1st April.
Capital Economics predicts a 7% increase in UAE oil production, reaching 3.1 million barrels per day by the end of the year.
The non-oil economy may encounter challenges from tight monetary policy in the coming years, but current data indicates strong and consistent credit demand.
The UAE’s fiscal policy is expected to remain supportive, bolstered by a significant budget surplus and robust performance in sectors such as tourism, retail trade, and real estate.
Furthermore, inflation, which reached a peak of 1.8% in 2024, is anticipated to slow down to 1.5% in 2025, alleviating some pressure on household incomes.
Capital Economics forecasts that the UAE’s GDP growth will rise from 4.0% in 2024 to 4.5% in 2025, solidifying its position as the Gulf region’s fastest-growing economy this year.