IMF hikes UAE's GDP growth forecast to 5.1% for 2025

This comes as IMF raised the Emirates' 2024 growth forecast earlier in May on the back of strong economic growth

Waheed Abbas

Published: Wed 23 Oct 2024, 7:55 AM

The International Monetary Fund (IMF) on Tuesday increased UAE’s growth forecast for next year by 0.9 per cent on the back of strong growth in non-oil sectors and steady crude prices.

According to the October edition of World Economic Outlook (WEO) released by the IMF on Tuesday, the UAE’s GDP is projected to grow 5.1 per cent in 2025 compared to the 4.2 per cent it projected in April's edition of WEO.

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This comes as IMF raised UAE’s 2024 growth forecast earlier in May on the back of strong economic growth. It hiked overall real GDP growth forecast to 4 per cent for this year as against its previous estimate of 3.5 per cent in April.

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Ali Al-Eyd, IMF’s head of staff team that visited the UAE in May, said that UAE’s economic growth is broad, led by robust activity in the tourism, construction, manufacturing, and financial services sectors.

“Foreign demand for real estate, increased bilateral and multilateral ties, and the UAE’s safe haven status continue to drive rapid growth in housing prices and an increase in rents, while adding to ample domestic liquidity. Hydrocarbon GDP growth is expected to increase this year, including higher crude oil production from the UAE’s Opec+ quota increase,” he said.

Al-Eyd added that impacts from geopolitical tensions were contained, while the authorities delivered a rapid response to address the recent flooding episode.

The UAE’s non-oil sectors have been performing exceptionally well in the post Covid-19 period, led by real estate, travel and tourism, trade, finance, retail and aviation, among others. This resulted in massive boom in the economy, creating a large number of jobs in the private sector, resulting in an increase in economic activity in the country.

On October 8, the UAE Cabinet approved the 2025 federal budget of Dh71.5 billion — the largest in the country's history – as the county maintains budget surplus on the back of increased revenues from oil prices, other revenues including new corporate tax and income fees.

“The strength of the UAE’s balance sheet means that it is well positioned to keep fiscal policy loose. In the second quarter, it recorded a budget surplus of 5.4 per cent of GDP and the authorities expect revenues to rise next year too – probably due to higher non-oil tax revenues thanks to a full year of corporation tax receipts. This is in addition to oil revenues potentially rising as the UAE raises output to take advantage of its higher base quota,” said James Swanston, economist for Mena region at Capital Economics.

The UAE aims to grow 7 per cent per year in order to double its GDP to Dh3 trillion by 2030.

Abdulla Bin Touq Al Marri, UAE’s Minister of Economy, said in May that global challenges have tested the UAE’s resilience, but the aim is to grow the economy at 7 per cent this year. He added the country is targeting to be a global hub for the innovation-based economy by the next decade.

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