The UAE Central Bank has revised its economic growth forecast for 2025, citing strong performance in non-oil sectors. The projected growth now stands at 4.9%, up from 4.4%, with expectations of 5.3% growth in 2026.
This upward revision reflects a surge in non-oil activity, supported by manufacturing, construction, real estate, and financial services. Early-year figures show the UAE economy grew 3.9% year-on-year in Q1 2025, with non-oil GDP expanding 5.3% over the same period.
Non-Oil Sectors Driving Momentum
Non-hydrocarbon activities continue to boost the UAE economy. Key sectors performing strongly include:
- Manufacturing: Increased production and exports drive growth.
- Financial Services: Banking, insurance, and fintech activities support business expansion.
- Construction and Real Estate: Residential and commercial projects remain active, with off-plan sales rising 14.3%.
- Tourism: Dubai welcomed nearly 10 million international visitors in H1 2025, up 6.1% from last year.
Oil-related activities accounted for 22.7% of GDP in Q1 2025, with hydrocarbon production also contributing to the revised forecast.
Economic Diversification Initiatives
The UAE government is actively reducing reliance on oil. The National Policy for Economic Clusters was recently launched, targeting an increase of Dh30 billion ($8 billion) in GDP annually. Focus areas include financial services, tourism, space, communications, data, and food sectors.
The country’s non-oil GDP reached Dh352 billion, contributing over 77% of total real GDP in Q1. Overall GDP rose to Dh455 billion during the same period.
Interest Rates and Inflation
The Central Bank recently lowered its benchmark interest rate by 25 basis points, following the US Federal Reserve. The overnight deposit facility rate is now 4.15%, down from 4.40%.
Inflation is easing thanks to lower energy and food costs. Prices increased 0.6% in Q2, with the 2025 inflation forecast reduced to 1.5%, expected to rise slightly to 1.8% in 2026.
Banking and Financial Stability
The UAE banking sector remains strong:
- Bank deposits: Up over 13% year-on-year in Q2.
- Lending: Increased 11%, supporting business and consumer growth.
- Asset quality: Maintains capital buffers well above regulatory requirements.
Financial stability, combined with robust growth in key sectors, underpins the positive economic outlook.
Real Estate and Tourism Highlights
The real estate market remains buoyant:
- Residential sales: Up 13.7% in the first five months.
- Off-plan and ready home transactions: Both saw double-digit growth.
Tourism growth is equally strong, with passenger traffic through Dubai and Abu Dhabi airports exceeding 62 million in H1 2025.
Conclusion
The UAE’s economy continues to show resilience, supported by strong non-oil activity, strategic diversification, and a stable financial sector. Manufacturing, real estate, construction, and tourism are key growth drivers.
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