Key Highlights

The UAE economy is set to grow from 3.7% in 2024 to 4.5% in 2025, despite a slight decline in non-energy sector growth.

The UAE recorded $16 billion in greenfield FDI in 2024, reflecting a robust investment climate and a 6.3% increase in Dubai tourism.

GCC economies are expected to double their growth rate from 1.9% in 2024 to 4% in 2025, aided by a recovery in the energy sector.

The UAE anticipates a 4.1% budget surplus in 2025, highlighting its financial resilience amid oil market fluctuations.

GCC inflation is projected to rise to 2.3% in 2025, with central banks likely to adjust interest rates to encourage private sector investment.

The most recent Oxford Economics ICAEW Economic Insight report projects that the UAE economy will grow from 3.7% in 2024 to 4.5% in 2025. 

The UAE is still a thriving center for innovation and investment, even though the non-energy sector is predicted to experience a modest deceleration, with growth falling from 4.5% to 4.3% as a result of capacity limitations. 

As per the official sources, UAE’s global leadership in FDI in relation to GDP is demonstrated by its $16 billion in greenfield FDI. In the first nine months of 2024, Dubai saw a 6.3% increase in visitors year over year, demonstrating that tourism is still a significant growth driver.

GCC Economies to Double Growth Rate in 2025

The economies of the Gulf Cooperation Council (GCC) are expected to grow at a rate that more than doubles, from 1.9% in 2024 to 4% in 2025. 

This is despite the OPEC+ oil production cuts being extended. The region is expected to greatly surpass world GDP growth, which is projected to inch up slightly from 2.7% in 2024 to 2.8% in 2025.

When oil production cuts ultimately end, the GCC’s energy industry is predicted to recover significantly in 2025, growing at a rate of 4.2%. In 2024 and 2025, the non-energy sectors will continue to develop at a rate of about 4%. 

Regional Purchasing Managers’ Indices (PMIs) and other necessary measures of economic activity are still strong. For example, Saudi Arabia’s PMI just reached a six-month high of 56.9, indicating robust domestic activity and company optimism.

Saudi Arabia Leads Non-Energy Growth

A strong 5.8% growth in the non-energy sector will boost Saudi Arabia’s economic growth from 1.4% in 2024 to 4.4% in 2025. In the third quarter of 2024, the kingdom’s GDP grew 2.8% year over year, ending a four-quarter drop. 

Major events like Expo 2030 and the FIFA World Cup 2034, as well as an ambitious $800 billion tourism investment package over the next ten years, are helping to maintain this revival.

UAE and GCC Showcase Fiscal Strength

The GCC nations remain financially resilient despite the difficulties brought on by declining oil income; Qatar and the United Arab Emirates are notable for their robust budget surpluses. 

The UAE’s careful financial leadership is demonstrated by its predicted 4.1% budget surplus in 2025. Saudi Arabia is able to pursue strategic investments because of its low government debt, even though it anticipates budget deficits.

Inflation and Monetary Policy in Focus

It is anticipated that GCC inflation will increase significantly, from 1.8% in 2024 to 2.3% in 2025, while staying under control. 

GCC central banks have followed the US Federal Reserve’s recent interest rate reduction, which totals 75 basis points in September and November 2024. It is anticipated that these changes will further encourage private sector and real estate investment.

Opportunities Amid Challenges

According to Hanadi Khalife, Head of the Middle East at ICAEW, the GCC business environment is always changing, which presents opportunities for expansion and creativity. Chartered accountants are essential for businesses to adopt sustainable business practices and adjust to this changing climate.

Scott Livermore, Chief Economist at Oxford Economics Middle East and ICAEW economic consultant, said, “The GCC’s anticipated 4% growth in 2025 highlights the effectiveness of its diversification efforts. 

However, maintaining long-term economic stability would require controlling capacity restrictions in high-growth industries like finance, real estate, and tourism.

The GCC continues to be a major force in the world economy as it strengthens its resilience and economic diversification, taking advantage of expansion in the travel, real estate, and finance industries to create a sustainable future.

Comparative Growth Estimates

Various views on the rate and sustainability of this expansion are highlighted by these disparate estimations, which also highlight an agreement on positive growth.

Key Drivers of Economic Growth

This economic expansion is going to be driven by several factors:

1. Economic Diversification

More than 70% of the UAE’s GDP today comes from non-oil sectors, demonstrating the country’s tremendous progress in diversifying its economy away from dependence on oil. 

This diversification is essential because it improves overall economic stability and reduces the dangers brought on by fluctuating oil prices. Industries like financial services, construction, and tourism are especially important in this transition.

2. Infrastructure Investment

A key component of the UAE’s economic policy is still infrastructure investment, which is bolstered by robust government balance sheets and advantageous financing terms brought about by falling interest rates. 

The UAE Centennial 2071 plan, which aims to place the nation among the top countries in the world by strengthening its economic capabilities, is in keeping with the government’s long-term vision, which is in line with its commitment to infrastructure development.

3. Population Growth

Another important factor influencing economic activity in the United Arab Emirates is population growth, which raises chances for employment and domestic consumption. The demand for goods and services increases as more people relocate to cities, which boosts economic growth even more.

4. Foreign Direct Investment (FDI)

Approximately $16 billion in greenfield projects were recently recorded, demonstrating the UAE’s ongoing capacity to draw significant foreign direct investment (FDI). 

In addition to increasing capital availability, this flow encourages innovation and competition across a range of industries.