UAE Economy Set for 4% Growth in 2025 Despite Oil Production Challenges, Says IMF
The International Monetary Fund (IMF) has forecast that the United Arab Emirates’ short-term growth will be around 4% in 2025, even if oil production is lower than expected.
Growth of the gross domestic product
According to a statement from the international organization, “continued growth in tourism, construction, public spending, and financial services supports non-hydrocarbon activity.”
The study was published by the IMF after a staff visit to the United Arab Emirates to discuss the country’s policy and reform priorities, the outlook, and economic and financial developments.
December saw robust expansion in the non-oil sector of the United Arab Emirates, as seen by the seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI), which increased from 54.2 in November to 55.4, the highest level in nine months.
The oil industry is expected to expand by more than 2% this year as a result of the Gulf country’s acceptance of a gradual increase in its OPEC+ quota and OPEC+ decisions to maintain output limitations.
The inflation rate
Despite rising housing and utility costs, IMF research projects that inflation will be contained at around 2% in 2025.
Strong capital inflows, fueled by business-friendly and social reforms, are anticipated by the Fund to support sustained real estate demand and support ongoing price increases in all industries and regions.
Surplus
The UAE’s budget surplus, which was 5% of GDP last year, is predicted to decrease to about 4% of GDP in 2025.
Foreign reserves are projected to be strong enough to finance more than eight and a half months of imports, and the current account surplus is projected to be approximately 7.5% of GDP.
According to the IMF, hydrocarbon revenues will decline due to declining oil production and volatile oil prices.
Meanwhile, non-oil revenues, supported by the continued implementation of the corporate income tax, are expected to grow steadily in the coming years.
The IMF has commended the UAE’s reform efforts, highlighting their role in supporting medium-term growth and facilitating a smooth energy transition, stressing that prioritization and sequencing are crucial to achieving effective results.