United Arab Emirates

The UAE’s fiscal breakeven oil price, the price at which the fiscal account is balanced, decreased to below USD60 per barrel in November 2025 from USD73 per barrel in July. With an average oil price of USD65 per barrel in 2025, the fiscal position remains strong. Although it has deteriorated since the peak in 2022, the UAE still holds a much stronger position compared to its Gulf peers. Total public debt, forecasted at 34% of GDP in 2025, is expected to fall to 32% in 2026. Given the reliance on oil revenue, which accounts for 40% of total revenue, Emirati authorities implemented a new 9% corporate tax as of June 2023, applicable to companies with income exceeding USD100,000, although there are still numerous exemptions and deductions. The country remains income tax-free with a low VAT rate of 5%.

The external position remained strong in 2025 and in the medium term. The annual current account balance was estimated at 14.5% in 2024 and is projected to go down to 13.2% by the end of the year. Oil revenue, along with a rapidly growing real estate and tourism sector, supports the UAE’s central bank in maintaining foreign reserves above seven months of imports In Q1 2025, the UAE’s non-oil foreign trade in goods reached AED781bn (+17% y/y), with non-oil exports up 41.3% to AED172.7bn, driven largely by gold and jewelry. China remained the largest import partner. Furthermore, the effective exchange rates softened in the first half of the year, with NEER down 2.1% y/y and REER down 3.1% y/y in June 2025, reflecting USD dynamics and relatively favorable domestic price developments.

On the monetary policy front, the UAE’s central bank has maintained its policy of following the Federal Reserve by lowering its key policy rate from 4.15% to 3.90%, effective from 30 October. With a fixed exchange rate to the dollar, the UAE needs to keep its rates broadly in line with US rates to avoid pressure on the peg. 

The United Arab Emirates benefits from a highly stable political system, anchored in a centralized federal monarchy dominated by the ruling families of Abu Dhabi. Internationally, the UAE maintains strong strategic ties with the US, including deep defense cooperation, arms procurement, intelligence sharing and the hosting of US military assets. These links remain a cornerstone of Emirati security and global positioning, despite occasional tactical disagreements. The UAE has also significantly expanded its diplomatic footprint in recent years through normalization with Israel under the Abraham Accords, which has led to growing cooperation in trade, technology, energy and security. At the same time, relations with India have deepened, reflecting the UAE’s strategy of diversifying partnerships toward Asia; this includes investment flows, energy cooperation and participation in groupings such as I2U2 alongside the US and Israel.

Regionally, the UAE has maintained an active diplomatic and security presence in a number of fragile states, including Yemen, Sudan, Somalia and Libya, reflecting its focus on regional stability, maritime security and the protection of key trade routes. In recent years, this outward engagement has shown signs of recalibration, as shifting regional dynamics and evolving relationships within the Gulf Cooperation Council influence policy priorities. In particular, Saudi Arabia’s expanding regional role, notably in Yemen and the wider Red Sea area, is contributing to a more measured and selective Emirati approach. While these developments may limit the UAE’s direct influence in certain theaters, they also reduce exposure to external political and operational risks, allowing the country to preserve its strong domestic stability and overall geopolitical resilience.