IMF revises UAE’s GDP growth forecast down to 4%

The International Monetary Fund has revised its forecasts for the UAE’s economy this year to 4%, down from its December forecast of 5.1% growth for the year, the IMF said in a press release following its most recent visit to the UAE.

The Fund also slashed its forecast for the hydrocarbon sector, with the Fund now seeing the sector growing above 2% in 2025, down from its previous forecast in December of 6.7% growth for the sector this year.

The revision comes on the back of Opec+’s decision to sustain production cuts, as well as the UAE’s implementation of a “a more gradual Opec+ quota increase,” the statement reads. “Volatile oil prices” are also set to impact revenues, the IMF said.

This brings the IMF’s forecast in line with that of the World Bank, which said in a report last week that it sees the economy growing at a 4% clip in 2025 — slightly down from its previous forecast of 4.1% growth for the year. Meanwhile, the Central Bank of the UAE (CBUAE) penciled in a higher growth estimate of 4.5% in 2025 in December.

Non-hydrocarbon activity will help offset the losses: Non-hydrocarbon revenue — namely coming from tourism, construction, public expenditure, and continued growth in financial services — is expected to see steady growth in the coming years, the IMF mission concluded. The IMF previously predicted non-hydrocarbon GDP growth to come in at 4.5% this year, down from 5.3% in 2024.

Capital inflows also remain strong on the back of “social and business-friendly reforms,” driving demand for real estate — and, in turn, driving further growth in real estate prices, the report reads.

Reforms are expected to bolster non-hydrocarbon revenue even further: The UAE’s recent reform efforts will “support medium-term growth and a smooth energy transition, with prioritization and sequencing key to ensure effective outcomes. Ongoing infrastructure

investments should enhance tourism and domestic activity, while ongoing trade liberalization,

underpinned by Comprehensive Economic Partnership Agreements, should further boost trade

and FDI,” the IMF mission said.

The Fund also slightly revised down its inflation forecast for the year, expecting it to remain contained at 2% — down from its December forecast of 2.1% inflation. This comes “despite higher housing and utilities-related costs.” The current account surplus is projected at around 7.5% of GDP, down from its December forecast of 8.2%.

NON-OIL ACTIVITY BOOSTS MIDDLE EAST GROWTH PROSPECTS-

Investors are confident about the region’s growth prospects this year: Growth in the Middle East is expected to be stronger in 2025 than it was in 2024 on the back of “continued solid expansions in the non-oil economies in key countries such as Saudi Arabia and the United Arab Emirates,” as well as “some likely increase in oil production,” according to the Association of Chartered Certified Accountants’ Global Economic Conditions report (pdf).

Confidence in the region among chief financial officers and accountants was among the highest in the world in 4Q 2024, despite falling sharply from 3Q, coming only second to South Asia in terms of overall economic confidence among the 1.8k surveyed. The study also showed that new orders in the region grew by 10 index points in 4Q 2024, outperforming all other markets surveyed — further signaling confidence in the region’s growth prospects for the year.