DUBAI (The Thursday Times) — The UAE’s economic landscape is set to undergo significant growth in 2025, primarily driven by robust activity in the non-oil sectors. According to the ‘UAE Macro Outlook’ by the National Bank of Kuwait (NBK), non-oil growth is projected at 4%, with higher investment inflows fuelling expansion. These investments, which are expected to flow into financial markets and real estate, will play a pivotal role in the nation’s broader economic development.
The role of investment inflows and real estate growth
Investment inflows, particularly those directed towards the UAE’s financial and real estate sectors, will be key drivers of economic growth in the coming years. The financial markets have already demonstrated their potential, with Dubai’s equity market recording an 8.5% rise in the first nine months of 2024. At the same time, real estate continues to flourish, with sales in Dubai rising by 30% year-on-year, reaching AED375 billion ($102 billion) during the same period. This upward trend is expected to maintain momentum, particularly in luxury apartment sales, as interest rate cuts forecast for 2025 are likely to stimulate further demand.
Looser monetary policy and rising consumer activity
The UAE’s favourable monetary policies will also support non-oil sector growth. The NBK outlook highlights a looser monetary policy that is expected to stimulate economic activity by lowering interest rates, making borrowing more accessible. Coupled with low inflation and a growing population, consumer activity is forecast to strengthen throughout 2025. Private credit expansion, which has been robust in 2024, will continue to bolster this positive economic momentum, reinforcing both the retail and real estate markets.
A resurgence in the oil sector
While the focus is on non-oil growth, the UAE’s oil sector is also poised for a significant rebound in 2025. After a modest growth of just 0.4% in 2024, the sector is expected to grow by 7.8% in the following year. This surge will coincide with OPEC+ reducing its production cuts in December 2024, providing a further boost to oil output. NBK projects that UAE oil production will reach 3.4 million barrels per day by the end of 2025, with the nation on track to meet its 5 million barrels per day capacity goal a year earlier than planned, by 2026.
Infrastructure development and foreign capital inflows
Infrastructure development will continue to be a crucial factor in attracting foreign capital inflows, with new projects and initiatives bolstering the UAE’s attractiveness to international investors. The government’s focus on ambitious infrastructure plans will not only enhance the country’s connectivity but also solidify its position as a leading global hub for trade and investment. This expansion is expected to bring sustained growth to key sectors such as construction, tourism, and logistics.
Government spending and fiscal outlook
The UAE government remains committed to driving economic growth through increased spending, with both the federal and Dubai budgets set for a significant boost in 2025. The UAE federal budget is earmarked for a 11.5% increase to AED72 billion, while Dubai’s budget will rise by 5.8% to AED84 billion. These higher spending allocations underscore the government’s intent to push forward with ambitious investment and infrastructure plans, positioning the nation for long-term growth.
Despite the rise in spending, the NBK outlook suggests that the government’s fiscal position will remain solid, though the budget surplus is expected to narrow from 3.1% of GDP in 2024 to 1% in 2025. This slight reduction is attributed to lower oil prices and higher expenditures, but the UAE’s fiscal management remains robust compared to its GCC counterparts.
