UAE’s GDP Forecast to Grow 4.5% in 2025

Weighed down by oil production cuts, the UAE’s GDP growth forecast stands at 3.7% in 2024 and a gradual hike will help its growth to pick up to 4.5% next year, the Institute of Chartered Accountants in England and Wales (ICAEW) said.

In its latest report entitled “Q4 2024: The ICAEW Economic Update: Middle East,” the institute expects 4.5% growth in the UAE’s non-energy economy this year but see a slightly more cautious recovery of 4.3% in 2025 as pricing pressures and capacity constraints dampen growth in key sectors such as finance and construction.

The UAE’s oil production has hovered slightly under 3 million barrels per day (MBPD), consistent with the OPEC+ production target and the oil output levels are expected to ramp up significantly throughout 2025-2028, fuelling overall growth, ICAEW said.

According to the ICAEW’s update, the GDP data for Q2 showed output expanded by 4.1% in Abu Dhabi and 3.3% y-o-y in Dubai. The latest Purchase Manager’s Index (PMI) surveys suggested non-energy sector growth has eased somewhat compared to H1.

However, the momentum remains supported by three key drivers: a competitive tourism and travel sector, a supportive real estate sector, and deepening capital market growth. Tourism remains a vital growth engine for the UAE economy with visitor arrivals in Dubai up 6.3% y-o-y in the first nine months of this year, while Dubai property transactions reached a record high in September. The local bourses continue to benefit from the flow of IPOs.

The UAE is also advancing progress across sectors key to its Industrial Development Strategy, including renewables, manufacturing, advanced technology, healthcare and food security, with key entities, such as the Abu Dhabi National Oil Company (ADNOC) and the Emirates Development Bank (EDB) providing funding.

Meanwhile, the Ministry of Industry and Advanced Technology launched a new digital platform to enhance interactions between investors and businesses and attract further investment. The UAE recorded $16 billion in greenfield foreign direct investments last year, cementing the nation’s ranking as a top FDI attraction spot. Key sectors leading the inflow of investment were financial services, real estate and manufacturing.

The UAE is also actively pursuing bilateral agreements by expanding its Comprehensive Economic Partnership Agreements (CEPA), with recent deals including Australia, Jordan and Vietnam.

“We consider trade a critical growth driver with the potential to enhance investment and private-sector collaboration. In October, H H Sheikh Mohamed bin Zayed al Nahyan attended the BRICS summit, marking the UAE’s inaugural participation as a full member,” ICAEW said.

Renewable Energy Sector

The UAE is also leading regional efforts in developing renewable energy capacity. In the run-up to the COP29 summit, the UAE unveiled an improved climate plan, pledging to cut carbon emissions by 47% from 2019 levels by 2035.

The goal marks a significant improvement on the target unveiled in July 2023, which showed a 19% reduction in carbon emissions from 2019 levels by 2030.

While the new target has faced criticism for excluding exported emissions and including offsets, it represents a substantial step forward and we expected the UAE to build on past efforts. The UAE’s renewable energy capacity surged by 70% last year and is now 10 times larger than it was 5 years ago, accounting for 14% of the country’s total electricity capacity.

The policy mix is turning more supportive for growth. The UAE cabinet approved its largest-ever budget for 2025, with a record expenditure of $19.5 billion balanced by matching revenues.

“This budget reflects the UAE’s development goals, which prioritise social development in support of non-oil sector growth, thereby promoting a sustainable economic trajectory. We project a budget surplus of 4.1% of GDP in 2025,” ICAEW said.