UAE economy predicted to grow by 4.5% next year

The UAE economy is set to grow from 3.7 per cent in 2024 to 4.5 per cent in 2025, a study showed on Wednesday.

According to the latest ICAEW Economic Insight report prepared by Oxford Economics, non-energy sector growth is expected to moderate slightly from 4.5 per cent to 4.3 per cent due to capacity constraints in key sectors. The country’s success in attracting investment is evident in its $16 billion of greenfield foreign direct investments, maintaining its global leadership position in FDI relative to GDP. Tourism continues to drive growth, with Dubai visitor arrivals increasing 6.3 per cent year-on-year in the first nine months of 2024.

The GCC economies will more than double their growth rate from 1.9 per cent in 2024 to 4 per cent in 2025, This acceleration comes despite the extension of OPEC+ oil production cuts and positions the GCC to significantly outperform global GDP growth, which is projected to increase modestly from 2.7 per cent in 2024 to 2.8 per cent in 2025.

The GCC’s energy sector is set for a strong rebound in 2025, with growth of 4.2 per cent following the gradual unwinding of oil production cuts. Meanwhile, the non-energy sectors will maintain their robust performance, with consistent expansion near 4 per cent in both 2024 and 2025. Regional PMIs remain firmly in expansionary territory, with Saudi Arabia’s PMI reaching a six-month high of 56.9, demonstrating strong business confidence and domestic activity.

Saudi Arabia’s economic growth economy is projected to accelerate from 1.4 per cent growth in 2024 to 4.4 per cent in 2025, supported by robust non-energy sector expansion of 5.8 per cent. “The kingdom has shown significant recovery, with GDP growing 2.8 per cent year-on-year in Q3 2024, following four consecutive quarters of decline. The tourism sector’s ambitious $800bn investment programme over the next 10 years, alongside major events like Expo 2030 and FIFA World Cup 2034, underpins the country’s diversification efforts,” the report said.

Despite challenges posed by lower oil revenues, the GCC continues to maintain an overall budget surplus, with Qatar and the UAE emerging as leaders in fiscal strength. Saudi Arabia, while anticipating budget deficits, benefits from low government debt levels, ensuring the flexibility needed to pursue strategic investments. The UAE’s projected 4.1 per cent budget surplus in 2025 demonstrates its strong fiscal management.

GCC inflation is expected to rise moderately from 1.8 per cent in 2024 to 2.3 per cent in 2025, remaining well-controlled across the region. Following the US Federal Reserve’s 75 basis points rate cuts in September and November this year, GCC central banks have mirrored these adjustments, with further reductions likely to boost real estate and private-sector investment.

Hanadi Khalife, head of Middle East, ICAEW, said: “The business landscape across the GCC continues to evolve and mature, creating new opportunities for growth and innovation. As professional services advisors, we see firsthand how businesses are adapting to change and investing in their future. The role of chartered accountants remains crucial in supporting organisations as they navigate this dynamic environment and pursue sustainable business practices.”

Scott Livermore, ICAEW economic adviser, and chief economist and managing director, Oxford Economics Middle East, said: “The GCC’s projected 4 per cent growth in 2025 highlights the success of the region’s diversification efforts amid global challenges. As the region continues to expand its tourism, real estate and financial sectors; managing capacity constraints in these high-growth sectors, as well as navigating global uncertainties, will be key to sustaining momentum and long-term economic stability.”