Robust non-oil growth continues as oil output set to pick up

The UAE economy continues to experience robust growth, estimated at +5.3% in 2025 and +4.0% in 2026. Despite the moderation in global oil prices, averaging USD84 per barrel in 2024, and a slowdown in neighboring Gulf economies, the Emirates maintain resilient growth due to their diversified economy. Inflation is anticipated to slightly accelerate to 2.5% in 2025, before slightly decreasing to 2.1% in 2026, above the 2023 levels.

The oil sector began to see a modest uplift in production in mid-2024, following a 15-month period of OPEC+ coordinated oil production ceilings. Nevertheless, oil output remained below 3mn barrels per day in 2024, lower than in 2023. In 2025, annual oil output is expected to grow by +10%. Among OPEC members, the UAE is actively pushing for greater production quotas to maximize production capacity and increase short-term revenue. The UAE is concerned about being left with significant oil reserves without sufficient global demand due to the ongoing energy transition away from non-renewables.

The UAE’s non-oil sector, more diversified than the rest of the region, sustained the country's growth in 2023 and 2024 despite the decline in oil production. Manufacturing accounts for approximately 7-8% of GDP, driven by heavy industries such as metal processing, aluminum, construction materials and petrochemicals, thanks to the availability of cheap energy. The government has prioritized manufacturing in its diversification strategy. Construction and real estate have also been strong growth contributors, spurred by private real estate development and significant government-led infrastructure projects, which have grown between +3% and +6% annually since 2018. The services sector remains a driving force in the Emirati economy, representing around 50% of GDP. Tourism, which has experienced high levels of growth since Expo 2020, expanded at a rate of +7-8% in 2024. Financial services, retail and logistics are also key contributors to the services sector in the UAE.

The UAE offers one of the most favorable business environments in the Middle East and is emerging as a global leader with an increasing number of trade agreements amid global fragmentation. The Emirates already have free trade agreements with their Gulf neighbors, the EU, Israel, China and Australia. Additionally, agreements with Indonesia and India are currently under negotiation to expand their scope. Further negotiations are ongoing with Malaysia, New Zealand, the Mercosur community, Japan, Turkey, South Korea and others.

This economic openness aligns with the UAE’s Industrial Strategy 2031, also known as Operation 300bn, which aims to transform the UAE into a global manufacturing hub by investing AED300bn (USD80bn) by 2031. The strategy focuses on strategically identified sectors such as advanced manufacturing, technology, pharmaceuticals, defense and aerospace. If successful, this initiative would nearly double the manufacturing sector's contribution to GDP from 7% to 13%, comparable to the industrial sectors of the United Kingdom or France.

The UAE's international influence has grown significantly over the past decade. Through Dubai-based logistics giant Dubai Ports World (DP World), which is ultimately owned by Dubai's ruling family, the UAE operates logistics infrastructure in 10 different African countries. Notably, DP World participates in the port off the Somaliland coast to service Ethiopian businesses and consumers.

Regarding environmental sustainability, the UAE faces significant challenges, including the lack of renewable electricity output, high water stress, and a low recycling rate. Climate change is expected to have an increasing impact on the UAE’s economy, as evidenced by the intensification of rainfall during rainy seasons, with the highest precipitation recorded in 75 years in April 2024, and rising summer temperatures. Overall, the UAE ranks 146th out of 210 economies in our proprietary Environmental Sustainability Index. In the medium term, this could affect the country’s ability to attract capital, as investors are increasingly focusing on sustainability.