UAE’s GDP growth slows down in 1Q

GDP growth slowed in 1Q, with the UAE’s economy recording a 3% rise to AED 485 bn for the quarter, according to Federal Competitiveness and Statistics Center data picked up by state news agency Wam. That marks a slowdown from last year — 1Q 2025 posted 3.9% y-o-y growth, and the full year saw 6.2% growth overall.

The catch: this print barely captures the war. The conflict and the Hormuz disruption that came with it only hit in March — Wam attributed the drag to “regional challenges” it called “confined to a limited number of activities.” That leaves 1Q as, at most, a one-month read on the war's economic toll. The Hormuz closure ran essentially uninterrupted through all of 2Q, with only a brief reopening under the 17 June US-Iran framework before that broke down and crude exports fell further into July. Whatever growth headwinds 1Q shows, 2Q was exposed to the disruption for the entire quarter — that's what will actually tell us what the war cost the economy.

The slowdown in growth also filtered through to the non-oil economy, with GDP growing 4.8%, down from 5.3% in 1Q 2025. Still, the non-oil sector did more of the heavy lifting, with its share of the economy rising to 79.4%, up from 77.3% a year earlier.

The composition underneath the growth is getting slightly narrower — financial services and ins. grew 17.3% y-o-y and alone added 2.44 percentage points (pp) to headline GDP growth — more than construction (8.1% growth, 1.04 pp), healthcare (7.7%), ICT (5.9%), and professional and administrative services (4.9%) combined. Wholesale and retail trade managed just 2.6% growth, and real estate expanded 4.8%, down from a year earlier, even as non-oil foreign trade rose 13.1% y-o-y in 1H.

Why it matters: That's a more fragile growth mix than the topline suggests going into a quarter (2Q) that will show the war's full economic weight for the first time. Whether financial services can keep growing at this clip once safe-haven flows into DIFC-adjacent activity settle — and whether real estate and retail stabilize — will say more about the UAE's actual war exposure than this print does.

REMEMBER- Dubai specifically also saw a slowdown in 1Q, with the emirate reporting growth of 2.4% y-o-y during the quarter to AED 232 bn, down from the 4% recorded for the same period the year before.

So far, the results are faring better than the most pessimistic expectations penciled in by some in the wake of the regional war. S&P had forecast a contraction of 2.7% for the UAE’s real GDP this year, on the back of less oil production, lower tourism inflows, softening demand, and hits to other sectors. The picture was particularly bleak for Abu Dhabi, given hydrocarbons account for 44.4% of its economy and its non-oil activity was also hit, while Dubai was forecast for a 2.5% contraction. The IMF also cut its growth forecast for the UAE to 3.1% for 2026 while, at the start of the war, Goldman Sachs had warned of a 5% contraction should the conflict last past April.

In response: Dubai came up with successive stimulus packages to support business activity and investor confidence, while the Central Bank of the UAE rolled out a resilience package to help insulate local banks from the impact of the war.