Fitch Solutions’ research unit BMI revised down its GDP growth forecast for the UAE to 4.6% in 2025, down 0.5 percentage points from 5.1% previously, citing “lower oil prices and the weaker global demand because of the US tariffs,” BMI said in its MENA Monthly Outlook. Even with the downgrade, growth would still exceed the 3.8% uptick estimated in 2024.

The rationale: BMI said the downward revision is driven by “lower oil prices and the weaker global growth outlook, which will weigh on investment and demand for exports.” Growth will be mainly led by an uptick in oil production as Opec+ rolls back its output restrictions.

The US tariffs’ direct impact on the UAE’s economy will be “limited,” despite the UAE estimated to have the “highest effective [tariff] rate” among oil exporters at 12.8%, said BMI, noting that its exports to the US represent only 2.1% of its total exports and 1.4% of its GDP. However, the indirect impact of lower oil prices be a “bigger blow to the economy,” it said.

REFRESHER- Opec+ is moving ahead with its planned supply hikes, citing a positive market outlook, but has left room to pause or reverse course if needed. The UAE is set to benefit from a raised production quota of 3.5 mn barrels per day in 2025, up from 2.9 mn.

On a positive note: The research unit still says “the UAE will be the fastest-growing economy in the GCC this year,” and one of the few markets in the GCC that will see reduced inflationary pressures from the lower fuel prices as they are not subsidized, which will somewhat offset the impact of rent price pressures. Paired with lower borrowing costs, the impact of the levies’ is set to be “manageable.”

BMI’s Oil & Gas team revised down its 2025 average Brent oil price to USD 68 per barrel, from USD 76, following a four-year price low in April after the US tariffs triggered market uncertainty. Trade tensions between Washington and Beijing also pushed Fitch Solutions’ research unit to cut its global growth expectations, which “will translate into weaker domestic and foreign investment as well as lower global demand for UAE goods and services.”

Still, the UAE should come out relatively unscathed: The UAE’s fiscal and external breakeven oil prices are much lower than USD 68 per barrel, allowing it to post fiscal and current account surpluses despite oil price dips, BMI said. Although weaker oil prices could narrow its fiscal surplus to 3.3% of GDP in 2025 — from 5.6% of GDP in 2024 — BMI says the UAE will be the only GCC member which will not post a deficit this year, and is unlikely to “need to cut back on spending or public investment.”

How this compares to other forecasts: The World Bank raised its UAE forecast to 4.6% this year and 4.9% in 2026, up from 4.0% and 4.1%, respectively, attributing the upgrade to stronger non-oil momentum and a gradual unwinding of Opec+ oil output cuts. A Reuters poll of economists forecasted 4.5% growth — a downward revision from 5% earlier in January, though still the fastest in the region. Meanwhile, the IMF is less optimistic with a 4% growth forecast. The CBUAE expects a stronger 4.7% GDP growth, while S&P Global had previously forecast 5.1% growth this year.

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