The Central Bank of the UAE (CBUAE) has revised its GDP growth forecast for 2025 and 2026 downward, citing global uncertainties, weaker oil prices, and slowing economic momentum worldwide.
In its latest Quarterly Economic Review, the CBUAE now projects real GDP to grow by 4.4% in 2025, slightly lower than the 4.7% forecast in March. The outlook for 2026 was also trimmed to 5.4%, down from a prior estimate of 5.7%. However, both figures remain above the 2024 growth estimate of 4.0%, reflecting continued momentum in the hydrocarbon sector.
The bank attributed the revisions to “slower global economic activity, increased uncertainty, and falling oil prices.”
Oil to Drive Acceleration in 2026
The hydrocarbon sector is expected to rebound strongly, growing 4.1% in 2025 and 8.1% in 2026, buoyed by OPEC+ output plans and enhanced upstream and midstream oil and gas activity.
In contrast, non-oil growth is set to decelerate to 4.5% in 2025, from 5% in 2024, amid broader global pressures. Nonetheless, the CBUAE noted ongoing strength in sectors such as tourism, manufacturing, transportation, and the digital economy, supported by innovation-friendly policies and public-private partnerships.
Risks and Reform-Fueled Optimism
The central bank warned that downside risks remain, including volatile energy prices, geopolitical tensions, and global trade disruptions.
However, the UAE’s economic outlook could be upgraded if structural reforms, trade agreements, and AI-led innovation materialize at pace. “Successful execution of reform agendas combined with diversification strategies” could significantly boost medium-term growth, the report said.
Inflation to Remain Tame
The CBUAE also lowered its inflation forecast for 2025 to 1.9%, a 0.1 percentage point decrease, citing continued declines in transportation and energy costs. Inflation is expected to remain stable in 2026 at 1.9%, following a 0.2 percentage point downward revision from earlier forecasts.
GCC Outlook Softened but Still Positive
Across the GCC, growth is projected to rise to 3.2% in 2025, up from 1.8% in 2024, with the UAE and Saudi Arabia driving the rebound. The regional outlook for 2026 was also adjusted down slightly to 4.3%, with anticipated oil market recovery and stronger non-oil performance expected to support expansion.
