The International Monetary Fund (IMF) now expects the UAE’s economy to grow 4.8% in 2025, up from its 4% forecast in April, placing the UAE among the region’s fastest-growing economies this year, according to its latest mission statement. The upgrade reflects a recovery in hydrocarbon activity thanks to higher oil output as Opec+ production ramps up, and continued momentum across non-oil sectors including tourism, construction, and financial services.

The Fund kept its 2026 growth forecast unchanged at 5%, similarly supported by both higher hydrocarbon output, “robust non-hydrocarbon growth,” and large-scale infrastructure projects.

Inflation easing, buffers intact: Inflation is now expected to come in at 1.6% this year, down from the Fund’s earlier 2.1% estimate, before stabilizing around 2% over the medium term. Real estate costs are once again set to be the main cause of price pressures, while tradables stay subdued. The Fund said risks to the outlook are “broadly balanced,” underpinned by the UAE’s sustained economic diversification agenda and large sovereign buffers.

Fiscal and external surpluses are expected to stay strong, “providing ample buffers […] to respond to adverse shocks.” The non-hydrocarbon primary deficit is narrowing faster than anticipated, supported by the rollout of the corporate tax and other indirect levies. The IMF again called for greater coordination between federal and emirate-level budgets to enhance policy consistency.

The banking sector remains “strong and sound,” backed by double-digit deposit growth, improving asset quality, and conservative lending practices. The Fund cited new safeguards including the countercyclical capital buffer and the Financial Stability Council, and progress on the Digital AED, stablecoin regulations, and capital-market reforms as signs of steady modernization amid prudent risk management. Banks’ reduced exposure to the real estate sector was flagged as positive, however the IMF also cited risks associated with real estate tokenization projects.

ICYMI- How this stacks up: The IMF’s new projection brings its outlook closer to that of other institutions. The CBUAE expects GDP to grow 4.9% in 2025, while the ICAEW forecasts growth of 5.1%, supported by a 4.7% non-oil expansion. Standard Chartered also sees 5% growth, compared to Fitch Solutions’ BMI at 4.3%.

IN OTHER ECONOMY NEWS-

Moody’s maintained the UAE and Abu Dhabi’s sovereign ratings at Aa2 with a stable outlook, citing strong state institutions, high per capita income, and robust oil reserves with 70 years worth of supply, Al Khaleej reports. The agency said these fundamentals underpin the economy’s resilience and support continued diversification away from hydrocarbons.

Fiscal strength: Moody’s highlighted the UAE’s solid public finances as a key driver of credit stability. Federal debt remains among the lowest globally at around 3% of GDP in 2024, rising modestly to 3.5% by 2027 amid bond and sukuk issuances to develop the local debt market. Abu Dhabi’s fiscal surplus stood at 7% of GDP last year, supported by high oil revenues and large financial assets that continue to anchor sovereign strength.

Economic outlook: The agency expects the non-oil sector to grow 4-5% between 2025 and 2026, supported by projects such as the Etihad Rail network — set to link the UAE with other GCC states — and the unified Gulf visa launching in 2026, which should bolster tourism and investment flows.

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