Fitch Solutions’ research unit BMI lowered its GDP growth forecast for the UAE to 4.3% in 2025, down from its earlier prediction of 4.6% but still faster than the 4% recorded last year, it said in a recent research note. However, its prediction for next year remains unchanged, with growth of 5.6% pencilled in.

The rationale: The downgrade is primarily attributed to a sharper than expected drop in non-oil activity so far this year. BMI now sees non-oil growth coming in at 4.2% this year rather than 4.7% — down from the 5% growth seen last year. Fallout from the Israel-Isran conflict, market uncertainty on the back of US trade tariffs, and lower oil prices are also dampening the outlook, the research unit said.

Abu Dhabi’s growth prediction was also trimmed…: BMI revised its forecast for Abu Dhabi’s growth in 2025 to 5%, down from 5.5%. The revision comes after 1Q saw the emirate record 3.4% y-o-y growth— short of BMI’s projections of 4.2% y-o-y growth. The tempered growth was attributed to “to weaker performance in the non-hydrocarbon sector,” with the transport, financial, construction, and storage sectors taking the hardest hit.

… as was Dubai’s: The research unit also lowered its growth forecast for Dubai this year to 2.7%, down from 3%. This was due to a decline in the purchasing managers’ index for the UAE to an average of 53.4 in 1H this year, a drop from its 56.2 average for the same period last year, on the back of global uncertainty from trade tensions and elevated regional risks, which impacted sentiment and new business.

REFRESHER- The UAE’s non-oil private sector saw a slight improvement in June despite a slowdown in demand on the back of regional tensions, with the S&P Global PMI edging up to 53.5 from 53.3 in May.

Things are expected to only go up from here, especially as the oil sector continues to benefit from the phased output hikes from Opec+, which are expected to boost oil sector growth to 8.7% next year, the research note said. The UAE’s non-oil sector is also expected to strengthen, further boosting overall growth. Looser monetary policy, a recovering tourism industry, and more investment as geopolitical tensions subside are expected to support economic activity. Further support will come from significant public investment in infrastructure projects and ongoing reforms.

There are still some downside risks, as any renewed escalation in geopolitical tensions would severely hit tourism, investment, and airport activity, as well as trigger an exodus from the foreign workforce. Any sharp drop in oil prices could also undermine public investment if it prompts spending cuts.

How does this compare to other forecasts? BMI’s forecast is very slightly lower than the Central Bank of the UAE’s (CBUAE), which revised down in June its growth forecast for the UAE this year to 4.4% in 2025. It’s more optimistic than the IMF’s, though, which maintained its UAE-wide growth forecast, leaving it unchanged at 4% for 2025, among the highest in the GCC. Meanwhile, the World Bank raised its GDP growth forecast for the UAE to 4.6% in 2025, citing increased oil production and non-oil momentum.

On the non-oil front, Capital Economics had penciled in an expansion of 5.5% for the sector, up from 5% last year, on the back of strong retail and tourism growth, while CBUAE predicted that non-oil growth is set to slow down to 4.5% this year, down from the 5% growth seen in 2024. The IMF sees the UAE’s non-oil GDP growing by 4.5% this year, with tourism, public spending, construction, and financial services driving growth.

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