Strong FDI inflows, non-oil sector growth, and strategic reforms to drive UAE’s GDP growth, maintaining its position as the region’s economic powerhouse.
The UAE is set to maintain its economic leadership within the GCC region, with projections showing it will achieve the highest GDP growth rates in 2024 and 2025. According to the latest study by the Institution of International Finance (IIF), the UAE’s economy is expected to grow by 4.0% in 2024 and 5.1% in 2025, the fastest among all GCC nations.
This forecast follows a robust performance in 2023, when the UAE’s GDP grew by 3.6%, the highest growth rate in the Gulf. Non-oil sectors will continue to drive this expansion, with a particular emphasis on the diversification of the economy and the country’s ongoing commitment to attracting foreign direct investments (FDI).
Non-Oil Sectors and FDI: Key Drivers of Growth
The UAE’s non-oil economy, which grew by 6.2% in 2023, is expected to moderate in 2024 and 2025 but will remain the fastest-growing in the region. Dubai, in particular, continues to see strong growth driven by tourism, hospitality, and infrastructure development, as the emirate solidifies its position as a global business and tourism hub.
In addition to its non-oil growth, the UAE remains the top destination for FDI in the region. The country attracted approximately $30 billion in foreign investments in 2023, accounting for 6% of its GDP— the highest share among emerging economies. This success can be attributed to a series of strategic reforms aimed at boosting the business environment, such as allowing 100% foreign ownership in select sectors, enhancing intellectual property protections, and streamlining licensing procedures.
According to Garbis Iradian, Chief Economist for MENA and Central Asia at IIF, the UAE’s continued focus on fostering a competitive, knowledge-driven economy will play a crucial role in sustaining its growth. Iradian emphasized that the UAE’s financial buffers, strong domestic demand, and supportive fiscal policies will keep the country on a solid growth trajectory, with the inflation rate expected to decline further to 2% in 2025.
A Vision for Long-Term Sustainability
The UAE’s fiscal policy remains expansionary, with a focus on maintaining robust financial health. The government’s fiscal breakeven oil price is forecast to fall below $65 per barrel by 2025, as the country continues to expand its non-oil revenues and increase oil exports. The general government debt-to-GDP ratio is expected to decline to 16% in 2024, reflecting the country’s solid fiscal position.
The UAE’s commitment to long-term sustainability is evident in its wide-ranging reforms aimed at increasing productivity and boosting the supply of highly qualified labor. By implementing policies that foster innovation, the UAE aims to build a competitive knowledge economy, ensuring that it remains a top global player in an ever-evolving business landscape.
With these efforts, the UAE is well on its way to maintaining its leadership in the GCC, securing a bright future as a global economic powerhouse.
