UAE Expected to Lead Regional Growth, Says Swiss Bank

UAE: Poised to Lead the Middle East’s Economic Growth by 2025

UAE is the regional economic leader: Key insights from Lombard Odier’s 2025 Outlook
The UAE is expected to emerge as the Middle East’s economic frontrunner in the coming years, supported by a favorable oil production agreement with the Organization of the Petroleum Exporting Countries (OPEC) and a thriving services sector. . These observations are taken from Lombard Odier’s 2025 Outlook, which describes the nation’s capacity for growth and resilience in the face of regional and international economic upheavals.

The Services and Real Estate Sectors as Growth Engines
Rising tourism, a flexible global interest rate environment, and a steady flow of foreign professionals with the requisite skills have all contributed to the UAE’s real estate sector’s continued success. According to Dr. Nannette Hechler-Fayd’herbe, Head of Investment Strategy, Sustainability, and Research at Lombard Odier, the UAE’s “healthy twin surpluses” in current and fiscal accounts will act as a buffer against future shocks.

Its image as a regional center for innovation and trade has been cemented by the nation’s advantageous economic policies and strategic location, which have further improved its capacity to draw in talent and investments.

Regional and Global Risks
Even though the UAE’s economy is expected to grow, the research warns of geopolitical dangers, especially the ongoing hostilities between Iran and Israel. The incoming US administration may have contributed to a de-escalation of Middle Eastern hostilities, which would greatly strengthen Gulf Cooperation Council (GCC) assets and regional economies, so fostering more favorable conditions for economic growth.

Oil Production and GCC Economic Trends
Real GDP growth in the GCC is predicted to increase from less than 2% in 2024 to more than 4% in 2025 as a result of the expected reversal of OPEC’s voluntary oil production cuts. This economic trajectory is further supported by the U.S. Federal Reserve-aligned monetary policies of the GCC central banks, which include potential interest rate cuts provided inflation is kept under control.

But the analysis warns that too much oil supply could cause crude oil prices to drop, which could have an effect on Saudi Arabia’s financial stability.

. Despite a projected rebound in real GDP growth, Saudi Arabia may face fiscal and current account deficits, given that current oil prices remain below the breakeven level required for budget balance. The country’s recent reforms in taxation, labor, and immigration are expected to enhance economic resilience in the medium term.

Broader Global Economic Trends
Economic dynamics continue to vary on a global scale. The economies of the Eurozone’s member states are probably going to have different fortunes. If growth sharply slows, the European Central Bank (ECB) is anticipated to cut interest rates to 1.25% or less, which might devalue the euro relative to the US dollar. Although the French stock market has significant growth potential, Eurozone stocks may underperform international markets. German Bunds are expected to do better in fixed-income markets, while the yields on French and Spanish sovereign bonds continue to be tightly correlated.

Meanwhile, Central and Eastern European economies, having led the global monetary easing cycle, are anticipated to witness a rebound in growth as disinflation trends conclude. As inflation starts to climb, Hungary and Czechia may stop monetary easing, while Poland’s central bank is anticipated to start cutting rates again in early 2025.

The Economic Rebound of South Africa
Following its general election, South Africa has demonstrated economic improvement, and market confidence has been bolstered by ministerial appointments.

Despite revenue challenges, the government has maintained its primary surplus guidance, aided by reduced electricity blackouts during peak demand periods. Modest growth of approximately 1.5% is forecast for the medium term, supported by two additional interest rate cuts. However, the South African rand’s volatility remains a key risk to economic stability.

The UAE is positioned as a major economic leader in the Middle East thanks to its strategic focus on diversifying its economy, taking advantage of advantageous oil accords, and developing a strong service sector. The nation’s solid budgetary base and progressive policies are anticipated to promote resilience and steady growth in the upcoming years despite geopolitical and international economic risks.