{"id":110603,"date":"2025-12-31T00:00:00","date_gmt":"2025-12-31T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/uae\/?p=110603"},"modified":"2026-01-04T20:58:40","modified_gmt":"2026-01-04T20:58:40","slug":"a-year-led-by-the-non-oil-sector-2","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/uae\/2025\/12\/31\/a-year-led-by-the-non-oil-sector-2\/","title":{"rendered":"A year led by the non-oil sector"},"content":{"rendered":"

The rise of the non-oil engine:<\/strong> The UAE economy effectively decoupled from oil price fluctuations in 2025 as the non-oil sector evolved from a secondary character to the primary engine of growth. This script switch saw the non-oil sector\u2019s contribution hit a record 77.5% of real GDP in 1H 2025<\/a>, driving total real GDP growth to 4.2% and reaching a value of AED 929 bn. The shift was seen across emirates, with Abu Dhabi seeing non-oil activities accounting for 56.8%<\/a> of its economy for the first time in 2Q 2025.<\/p>\n

Private sector performance also did well:<\/strong> Despite regional geopolitical headwinds that temporarily slowed the purchasing managers\u2019 index (PMI) to a low of 52.9 in July<\/a>, the private sector showed resilience and staged a turnaround before the year was out. By November<\/a>, the index rose to an 11-month high of 54.8 points, boosted by favorable market conditions and a jump in new orders.<\/p>\n

This recovery coincided with a controlled inflationary environment<\/strong>, as the country's headline inflation remained largely contained, stabilizing at 0.6% y-o-y by the end of 2Q 2025<\/a> due to lower energy costs. While Dubai saw a temporary spike to 3.36% in October<\/a>, it cooled back to 2.73% in November, driven by a slowdown in rental and fuel price growth.<\/p>\n

\n

Legislative overhaul: From tax ease to institutional compliance<\/p>\n

These figures were also supported by fiscal overhaul measures from the Finance <\/strong>Ministry to improve fiscal sustainability<\/strong>, including some tax changes and moves to maintain a favorable business environment. To align with OECD global standards, the UAE raised the minimum corporate tax<\/a> for large multinational companies from 9% to 15% (domestic minimum top-up tax) from 1 January.<\/p>\n

Other legislative milestones:<\/strong> The reforms also included the approval of the e-invoicing<\/a>system<\/a>, expanding the scope of exemptions for freezone companies, and imposing qualitative taxes such as Sharjah\u2019s introduction of a 20% natural resources tax. This is in addition to new amendments to the Tax Procedures Law<\/a> announced earlier this month. These measures aim to shift the economy from reliance on tax ease to full institutional compliance.<\/p>\n

Legislative flexibility to support investment and family businesses:<\/strong> To maintain the country\u2019s attractiveness as a financial hub, the Finance Ministry balanced new taxes with qualitative incentives. Freezone exemptions were expanded<\/a> to include strategic sectors such as chemicals and environmental goods, and companies were allowed<\/a> to deduct depreciation of investment properties from their taxable income. The Federal Tax Authority also launched facilities that allow family foundations<\/a> to be treated as unincorporated partnerships, giving them greater flexibility in managing their wealth for tax purposes.<\/p>\n

\n

We\u2019re going into a big spending year<\/p>\n

Looking ahead to 2026, the UAE is placing its biggest bet on public spending.<\/strong> Cabinet approved the largest federal budget in the country's history<\/a> for 2026, with spending set to rise 29.2% y-o-y to AED 92.4 bn. This fiscal expansion aims to ensure the continuity of growth momentum amid diverging expectations from international institutions; while the CBUAE<\/a> and BMI Research<\/a> are optimistic that growth could hit 5.2%, Standard Chartered Bank<\/a> adopts a more conservative view at 4%. <\/p>\n

The federal inflation rate may accelerate in 2026 to 1.8%<\/strong>, according to estimates from the CBUAE, up from this year\u2019s forecast of 1.3%. Other forecasts from the IMF, World Bank, Standard Chartered, and the ICAEW see inflation falling anywhere between 1.9-3%, while NBK thinks inflation could decelerate to below 2% in 2026 on the back of a slowdown in rental price growth in Dubai and a drop in food and fuel inflation. <\/p>\n

The big question of 2026:<\/strong> How successful major projects such as the Etihad Rail network and the Unified GCC Tourist Visa will be in attracting sufficient investment flows to counter a potential acceleration of inflation. <\/p>\n","protected":false},"excerpt":{"rendered":"

Non-oil sector growth contributed a record 77.5% of GDP in 1H 2025<\/p>\n","protected":false},"author":1,"featured_media":110604,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"newspack_ads_suppress_ads":false,"newspack_popups_has_disabled_popups":false,"newspack_sponsor_sponsorship_scope":"","newspack_sponsor_native_byline_display":"inherit","newspack_sponsor_native_category_display":"inherit","newspack_sponsor_underwriter_style":"inherit","newspack_sponsor_underwriter_placement":"inherit","ep_exclude_from_search":false,"_primary_brand":0,"newspack_featured_image_position":"","newspack_post_subtitle":"","newspack_article_summary_title":"Overview:","newspack_article_summary":"","newspack_hide_updated_date":false,"newspack_show_updated_date":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[2420],"tags":[19,7,285,2419],"brand":[],"newspack_spnsrs_tax":[],"class_list":["post-110603","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-year-in-review","tag-economy","tag-enterpriseam-uae","tag-inflation","tag-year-in-review","wpautop","entry"],"acf":{"mongo_id":"c93160fa-1b9f-4815-a015-273b6a791514","order":"6","is_powered_by":false,"story_type":"1","photo_url":"https:\/\/ent.news\/2025\/5\/2409.jpg","photo_position":"above","homepage_title":"","full_issue_title":"2025 was the year of non-oil sector-led growth in the UAE","related_issue":[110593],"teaser":"Non-oil sector growth contributed a record 77.5% of GDP in 1H 2025"},"yoast_head":"\nA year led by the non-oil sector - 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