The UAE’s non-oil economy is projected to expand by 4% in 2025, fueled by a surge in investment inflows into key sectors such as finance and real estate, according to the ‘UAE Macro Outlook’ published by the National Bank of Kuwait (NBK).
Key Drivers of Growth
The report underscores that the UAE’s financial markets and real estate sector will play pivotal roles in attracting foreign capital. The Dubai equity market saw an 8.5% rise in the first nine months of 2024, while real estate sales surged by 30% year-on-year, reaching AED 375 billion ($102 billion) during the same period.
Furthermore, the expected interest rate cuts in 2025 are anticipated to stimulate demand, particularly in luxury apartment segments, which remain attractive due to their lower valuations and higher return potential.
Private Credit and Monetary Policy Support
NBK’s outlook also points to robust private credit expansion and a looser monetary policy in 2024, trends that are likely to continue into 2025. With low inflation and a rising population, consumer activity is expected to grow, providing further momentum to the economy. The UAE’s consumer base will be well-supported, with rising incomes and increased spending.
UAE Oil Sector to Rebound in 2025
While the non-oil sector is driving much of the growth, the UAE’s oil sector is also set to rebound in 2025, with production expected to rise by 7.8% after a slow year in 2024 with only 0.4% growth. This uptick follows OPEC+ scaling back production cuts, scheduled for December 2024. The UAE’s oil output is projected to reach 3.4 mb/d by the end of 2025, with the nation on track to hit its 5 mb/d capacity by 2026.
Fiscal Position and Government Spending
Despite robust growth, the report notes that the UAE’s fiscal surplus is expected to narrow from 3.1% in 2024 to 1% of GDP in 2025, as lower oil prices and increased government spending weigh on the surplus. Both the federal UAE and Dubai budgets have earmarked higher spending for 2025, with federal spending up 11.5% to AED 72 billion and Dubai’s budget increasing by 5.8% to AED 84 billion.
These figures highlight the government’s commitment to infrastructure and investment as part of its broader economic diversification plans.
Aligning with World Bank Forecast
NBK’s growth projections align with a recent World Bank forecast, which estimates the UAE’s GDP to rise by 4.1% in 2025, driven primarily by the non-oil sector. This reflects a growing confidence in the UAE’s ability to maintain its trajectory of economic diversification while benefiting from global investment trends and strong domestic demand.
