The UAE economy is projected to grow by approximately 4% in 2025, according to the latest IMF review. Despite lower-than-expected oil production due to OPEC+ agreements, near-term growth remains strong and shows resilience.
Key Drivers of Economic Growth
The IMF highlighted several factors driving the UAE’s non-oil sector growth. Tourism, construction, and public spending continue to expand rapidly. Moreover, financial services and steady capital inflows are boosting economic activity across multiple sectors.
Demand for real estate is also rising due to investor-friendly reforms. This surge has driven property prices higher across various segments. “Tourism and infrastructure investments, along with advancements in artificial intelligence, are significantly improving productivity,” said Ali Al-Eyd, head of the IMF mission.
The IMF’s forecast aligns with the World Bank’s projections, both expecting GDP to grow by 4% in 2025.
Meanwhile, oil GDP is expected to grow above 2% this year. The UAE continues to gradually increase its OPEC+ quota. Despite challenges, inflation is projected to remain stable at around 2% in 2025, even with higher housing costs.
Resilient Banking Sector
The UAE’s banking sector remains highly stable. Banks are well-capitalized and have strong liquidity levels, according to the IMF. Exposure to real estate has dropped from 23.6% in 2021 to 19.6% by September 2024.
The Central Bank closely monitors banks to ensure real estate exposure stays within safe limits. In December 2021, it introduced new standards to strengthen risk management for property-related loans.
Positive Mortgage Outlook
As interest rates drop, demand for mortgages is steadily increasing. This trend is expected to continue in 2025.
The UAE’s proactive reforms and resilient financial system position it strongly for sustained growth in the coming years.
