The International Monetary Fund (IMF) has projected the United Arab Emirates (UAE) economy to grow by approximately 4% this year, maintaining similar growth through 2025. This projection follows recent visits by IMF staff to discuss economic and financial developments within the country.
Despite slightly lower than anticipated oil production levels linked to OPEC+ agreements, the IMF remains optimistic about the UAE's economic resilience. They reported, "Short-term growth is resilient and is expected to remain healthy at around 4% by 2025, even with lower-than-expected oil production linked to OPEC+ agreements." They attributed this growth to various sectors, asserting, "Economic activity unrelated to hydrocarbons is being stimulated by tourism, construction, government spending, and sustained growth within the financial services sector."
The IMF’s statement also emphasized the steady influx of capital to the UAE, drawn by social and business-friendly reforms implemented by the government. This continues to drive demand for real estate, resulting in price increases across different segments and locations.
Projected increases in the oil sector’s contribution to the GDP are attributed to OPEC+ decisions leading to reduced production volume. The IMF forecasts this contribution will rise by more than 2% this year. Meanwhile, inflation is predicted to stabilize around 2% by 2025, regardless of rising costs for housing and utility services.
The anticipated decrease in export revenues from hydrocarbons is noted, with the IMF warning about fluctuated oil prices and reduced production. Yet optimistic predictions remain for the budget surplus and active trade balance, as these are expected to stay at comfortable levels. The budget surplus is forecasted to decline to around 4% of GDP compared to the previous year’s 5%.
Even with these setbacks, non-hydrocarbon revenues are set to progressively increase with the introduction of corporate income tax. The UAE’s national debt remains stable at approximately 30% of GDP, showcasing sound fiscal management. Current budget surplus forecasts are projected at about 7.5% of GDP, bolstered by international reserves which cover over 8.5 months of imports.
Banking institutions within the UAE are also expected to exhibit strong capitalization and liquidity levels, with asset quality steadily improving. "The resilient internal activity and sustained demand for credit supported banks’ profitability amid still high interest rates," stated the IMF. This positive trend suggests a healthy banking sector capable of supporting the broader economy.
The IMF praised the UAE's government reform initiatives, identifying them as pivotal for mid-term growth and economic transitions, stating, "Current investments in infrastructure development should boost tourism and domestic activity, where trade liberalization backed by comprehensive economic partnership agreements will spur trade growth and attract foreign direct investment."
Further reflecting the economic climate, the UAE’s Ministry of Human Resources and Emiratisation (MOHRE) has reported significant growth within the private sector, indicating a 32.16% increase in registered private enterprises by 2024.
Such efforts are consistent with data from G42, which surfaced during studies on the readiness for AI technology integration. This reflects the UAE's focus on advancing its technological infrastructure alongside sustained economic growth.
Meanwhile, on the automotive front, neighboring Kyrgyzstan has seen notable activity with car imports from the UAE soaring by 42% over 11 months of 2024, driven by innovation and supply abilities. Reports from the National Statistics Committee state, "From January to November, Kyrgyzstan imported 1,900 cars from the UAE valued at $20 million, marking significant growth from the previous year's figures." Major suppliers for Kyrgyzstan's automotive industry besides the UAE include China, Korea, and the USA.
The burgeoning economy of the UAE, reflected through various sectors ranging from real estate to import activities, showcases not just resilience but also adaptability amid global economic fluctuations. The forward-looking strategies undertaken by the UAE government, when observed alongside favorable projections from the IMF, may signal promising times for the nation’s economic advancement.