IMF Forecasts Robust Economic Expansion for UAE in 2025

A staff team from the International Monetary Fund (IMF) led by Mr. Ali Al-Eyd visited the UAE from January 14th – 22nd 2025 to discuss economic developments, outlook and policy priorities.

At the conclusion of the mission, Mr. Al-Eyd stated that UAE’s near-term growth remains strong with real GDP projected to increase by 4 percent in 2025 despite lower oil production under OPEC+ agreements. 

The other non-hydrocarbon sectors that include tourism, construction, public expenditure and financial services have maintained growth supported by strong capital inflows and business and social-friendly reforms. With real estate experiencing a surge in demand, it is further contributing to economic activities and the inflation is anticipated to remain under control at about 2.0 percent during 2025.

While hydrocarbon revenue may decline due to volatile oil prices, fiscal and external surpluses appear likely to be sustained at comfortable levels. The fiscal surplus is moderated to 4 percent of GDP in 2025 and is seen to broaden with improving stable and stable non hydrocarbon revenue implying rising corporate income tax. Public debt remains contained at 30 percent of GDP with international reserves covering more than 8.5 months of imports.

The UAE banking sector is well-capitalized, liquid and improving in asset quality. Exposures of banks to the real estate sector have decreased however, the risks of house price increases should be watched closely. The IMF emphasized the importance of continued reforms in areas like anti-money laundering, crypto regulation and monetary transparency to support financial stability and capital market development.

Global uncertainties including geopolitical tensions and oil price volatility pose risks to UAE’s outlook. However, the significant financial buffers and infrastructure, AI and trade liberalization reforms are likely to cushion the short-term risks and improve the medium-term growth.

The IMF lauded the efforts of the UAE in reforming energy transition, infrastructure development and trade liberalization which are crucial for sustainable growth.