UAE Central Bank Forecasts 5.2% GDP Growth for 2025

The UAE Central Bank has announced a GDP growth forecast of 5.2% for 2025, signaling optimism for the country’s economic performance in the coming years.

The projection indicates that the UAE’s economic expansion will primarily be fueled by the oil sector, with a projected growth rate of 6.2%, followed by the non-oil sector at 4.7%.

Revision in GDP Forecast for 2024:

However, the Central Bank revised its projection for 2024, expecting a slower growth rate of 4.2% compared to the previously forecasted 5.7%. This adjustment is attributed to various factors, including a slower oil production recovery and declining non-oil sector growth.

Impact of OPEC+ Agreement on Oil Production:

The slowdown in oil GDP growth is linked to the OPEC+ agreement in November 2023, which led to subdued oil production. While production is expected to resume gradually from the fourth quarter of 2024, it will still fall short of earlier projections.

The Central Bank acknowledges significant uncertainty surrounding its forecasts for 2024 and 2025, citing geopolitical tensions, global economic slowdown, and potential further reductions in oil output as key downside risks.

Inflation Outlook and Economic Factors:

Inflation is expected to accelerate to 2.5% in the UAE, driven by higher commodity prices such as oil, wheat, and corn, along with the anticipated depreciation of the US dollar. Despite this acceleration, inflation remains below the world average.

Capital Economics notes the UAE’s resilience in the face of economic challenges, highlighting its low fiscal and external breakeven oil prices compared to other countries in the region. The analysis suggests that despite potential price declines, the UAE’s fiscal policy can remain accommodative, supported by strong non-oil activity and a recovering real estate sector, particularly in Dubai.