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Capital Economics highlighted the United Arab Emirates (UAE) is poised to sustain its position as the fastest-growing economy in the Gulf region this year, bolstered by robust oil output and a flourishing non-oil sector. Despite adhering to OPEC+ policy with stable oil production at 2.9 million barrels per day (bpd) in January and February, the UAE is expected to see an overall economic upturn.
The non-oil sector is the primary driver of the UAE’s economic expansion, with private sector credit growth accelerating from 7.5% year-on-year in November to 8.0% in December. This surge is supported by a significant rise in personal loans for consumption.
Moreover, the Dubai International Financial Centre registered a record number of new companies in 2024. Public parking data indicates an all-time high utilization rate of 28.3%, suggesting increased foot traffic, while Dubai also set a new record for foreign visitor arrivals in 2024, reaching 18.7 million, with indications this trend will extend into 2025.
However, the Purchasing Managers’ Index (PMI) surveys for Dubai and the UAE in February hint at a potential slowdown in non-oil GDP growth during the first quarter. Nonetheless, the UAE is set to benefit from OPEC+’s decision to boost oil production starting April 1. Capital Economics forecasts a 7% increase in UAE oil production to 3.1 million bpd by year-end.
The non-oil economy could face challenges from tight monetary policy over the next few years, but current data shows persistent solid credit demand. The UAE’s fiscal policy is expected to remain supportive, thanks to a considerable budget surplus and strong performance in tourism, retail trade, and real estate sectors. Inflation, which peaked at 1.8% in 2024, is projected to decelerate to 1.5% in 2025, easing the burden on household incomes.
Capital Economics predicts the UAE’s GDP growth will accelerate from 4.0% in 2024 to 4.5% in 2025, securing its lead as the Gulf’s fastest-growing economy this year.
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