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The UAE’s gross domestic product (GDP) is projected to grow by 5% year over year in 2025, significantly outpacing the global GDP growth forecast of 3.2%, according to the Mastercard Economics Institute’s Economic Outlook 2025. This marks a modest rise from the 3.1% growth projected for 2024.
Consumer spending in the UAE is anticipated to rise by 4.3%, while consumer price inflation is expected to remain modest at 2.3%, reflecting a stable and resilient economy.
Image: UAE’s Gross Domestic Product | Courtesy: Google Finance | 17 December 2024
Non-Oil Sector and Economic Diversification
The report highlights non-oil economic activity as the primary driver of growth, aligning with the UAE’s long-term Centennial 2071 Vision. Economic diversification, supported by strong government balance sheets and significant investments in infrastructure, will underpin this expansion.
Private sector investment is also set to benefit from lower interest rates, which will stimulate employment and domestic consumption. Additionally, a continued population growth is expected, which is a key driver of private consumption, albeit at a moderated pace.
Tourism as a Growth Engine
Tourism remains a bright spot for the UAE and broader GCC economies. The region’s strategic focus on expanding its tourism offerings positions it among the fastest-growing global destinations. Additionally, the strength of US dollar-pegged currencies is boosting demand for outbound travel.
Khatija Haque, Chief Economist for EEMEA at Mastercard, emphasized the region’s resilience:
“With ongoing public and private investment driving solid non-oil GDP growth, the GCC region continues to outperform most global markets.”
The report underscores the continued rise of the experience economy, where consumers prioritize spending on “big moments” over material goods. This trend is particularly strong in:
Saudi Arabia: Experience spending up 451% as of February 2024, compared to 2019
Qatar: Experience spending up 503% in the same period
By September 2024, spending growth stabilized at 326% in Saudi Arabia and 279% in Qatar, driven by the development of leisure and entertainment facilities and global sports events attracting international audiences.
Population and Migration Dynamics
The UAE’s robust population growth has been heavily driven by net migration, which contributed 10.8% to population increases between 2019 and 2023. Migration enriches the country’s human capital while simultaneously supporting remittance flows to developing economies.
Global remittances surged from $128 billion in 2000 to $857 billion in 2023, with projected growth of 3% in both 2024 and 2025, according to the World Bank.
Digitization of payments is driving cost efficiency, security, and convenience for remittance recipients.
Rise of the SHEconomy
The report also highlights the increasing role of women in driving economic growth, particularly in the UAE. Women now represent 55.4% of the workforce, according to World Bank data.
Key factors contributing to this trend include:
Job creation in female-dominated sectors like healthcare and education
The rise of remote work, which provides greater flexibility for women balancing careers with caregiving responsibilities
This shift is expected to boost household disposable incomes and drive consumption growth into 2025.
Easing Global Inflationary Pressures
Global inflation eased significantly in 2024, driven by lower prices for durable goods and moderated inflation in nondurable goods. While tariff risks remain a concern, slower wage growth is expected to reduce services inflation.
The Mastercard Economics Institute predicts global trimmed inflation (excluding extreme outliers) will remain steady at 3.2%.
The UAE’s projected 5% GDP growth reflects its resilience, driven by non-oil diversification, rising consumer spending, and tourism expansion.
