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UAE growth expansion beats expectations

7 October 2025

 

Bolstered by sustained economic diversification and a steady rise in exports, the UAE remains poised for robust growth well above the global average of 3% in 2025 and beyond its own growth projections.

Following an estimated 4% real GDP expansion in 2024, the UAE economy is expected to accelerate its expansion to 4.8% in 2025, according to the Washington-based IMF. This is being driven by both strong non‑hydrocarbon activity and a rebound in oil output as Opec+ production cuts recede.

Both GDP figures represent a further step up from the IMF’s April 2025 estimates of 3.8% and 4% for 2024 and 2025 respectively, with the UAE economy consistently outperforming the IMF’s growth expectations.

Despite global economic uncertainty and rising instability, the UAE economy is expected to remain resilient in the near term, with the fund projecting growth will quicken to 5% in 2026.

“The UAE has shown strong resilience to global uncertainty, regional conflicts and oil market volatility … supported by sustained diversification and expanding exports,” said the IMF in its latest statement on the country.

Inflation is expected to remain subdued in 2025, averaging 1.6% – down from an April 2025 IMF estimate of 2.1% – and to hover around 2% in the medium term.

Housing costs remain the primary source of price pressure and a growing concern for affordability, while prices for tradable goods are expected to remain stable.

Property market risk

Concerns over the state of the real estate market are one area where potentially negative assessments hang over the UAE economy.

These concerns are currently concentrated in Dubai, where soaring prices have outpaced average wage rises and prompted warnings of a possible bubble.

UBS, in its Global Real Estate Bubble Index 2025 report, has significantly worsened its assessment of risk in the Dubai property market, moving it from 14th to 5th place in its ranking of exposure to a potential market crash.

The rise in Dubai’s risk assessment was the largest increase of any market since the prior edition of the report, and the overall classification for Dubai was raised from ‘moderate’ to ‘elevated’.

Property prices in the Dubai housing market have surged about 70% above pre‑pandemic levels in recent years, according to Knight Frank and JLL data, contrasting with more gradual recoveries in other sectors.

Sales have also shifted towards larger volumes of off‑plan transactions, where prices continue to rise even as growth in ready property prices has levelled off.

In May 2025, ratings agency Fitch issued an assessment pointing to up to a 15% moderation in prices in H2 2025 through 2026, suggesting the market had reached its peak.

Future oversupply was the key concern in the report, which expected new construction projects launched between 2023 and 2024 to add about 250,000 units to the market, with a peak of 120,000 handovers in 2026.

Countering these assessments are arguments that the city’s underlying economic fundamentals and steady population growth will continue to support consistent demand capable of absorbing the expected supply.

The UAE government is also encouraging net immigration through more flexible residency visa arrangements, which, together with property sale incentive schemes, are expected to continue to drive property demand in the near term.

Broader momentum

Other key growth sectors for the UAE include tourism, construction and financial services — all of which continue to support the country’s economic momentum.

The resilience of the country’s financial markets and capital flows despite recent global and regional shocks remains a positive signal for investors.

The UAE is also supporting an investor‑friendly environment through agile regulation of fast‑growing areas, including the emerging market for virtual assets.

This has been complemented by the country’s recent removal from the Financial Action Task Force’s grey list, reflecting the government’s enhanced efforts to regulate and combat irregular financial activity.

In the background, the UAE government continues to expand its Comprehensive Economic Partnership Agreements (Cepa) with other countries — supporting diversification of the country’s global trade relations and networks.

Support for the UAE’s resilience is also reflected in a positive trend in the S&P Global Purchasing Managers’ Index (PMI) in September, which saw the non‑oil private sector deliver its best performance in seven months.

After dipping to a recent low in July, the UAE PMI climbed for two straight months to reach its highest level since February in September — buoyed by a resurgence in new order growth as the economy emerged from the softer summer period.

Despite a weaker year overall, with new order growth in particular falling to its lowest point in four years in August, UAE business sentiment nevertheless hit a 10‑month high that same month, even as new orders dipped.

Now, the continuation of overall positive momentum in the index for the second month running suggests that recent concerns, including over geopolitical developments in the region in the form of the Israeli attacks in the Gulf, have been largely shrugged off.

The government appears to be keeping the country’s fortunes on an even keel despite the choppy global economic backdrop.

Taken together, the government’s firm stewardship, momentum in financial markets and robust public and private activity across key growth sectors help explain why the country’s growth continues to exceed expectations.

ALSO READ: Public spending ties the UAE closer together

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John Bambridge

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