The International Monetary Fund (IMF) maintained its growth forecast for the UAE’s economy at 4.8% in 2025 and 5% in 2026 in line with its latest projections in October, according to the 2025 IMF Article IV consultation report for the UAE.

The anticipated 2025 growth is driven by a projected 5.3% expansion in the hydrocarbon sector, which is expected following the reversal of the Opec+ group's decision to pause oil production increases, alongside a 4.6% rise projected for the non-oil sector.

The IMF sees the UAE economy continuing to show resilience against global shocks and uncertainty, underpinned by “sustained external surpluses.”

The UAE’s overall fiscal surplus is forecast to remain around 5% in 2025 and 2026, as government revenues are exceeding expenditures leading to a projected net lending of 5.1% and 4.7% of GDP in 2025 and 2026, respectively.

The external position remains strong, but the current account surplus is projected to decline to 13.3% of GDP in 2025 from 14.5% in 2024. The fund expects our current account surplus to shrink further amid higher intermediate and final goods imports in support of the diversification strategy.

The banking sector is getting tub-tubs for maintaining resilience, keeping capital and liquidity levels above the regulatory minima during mid 2025. Tier 1 capital also came in at 16% while liquidity coverage ratio was at 153.2%, with a declining non-performing loans ratio showing strengthened capital buffers. Liquidity also increased, largely at the back of increased net capital inflows.

Inflation is projected at 1.6% in 2025 and about 2% in 2026, with housing prices being the main driver for inflation. The fund attributed lower oil prices and weaker non-energy commodity prices as key factors for its inflation projection for this year.

Our take

The key message from the IMF to the UAE this time around? Simply: Keep it up. The policies supporting innovation and diversification have been doing wonders to the economy, so a continuation of that along with “extreme vigilance in risk management” are what the doctor ordered for 2026.

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