UAE economic outlook remains bullish despite global volatility

Khaleej Times

2 days ago

Despite global economic volatility, the UAE maintains a strong economic outlook, analysts say.
This is primarily driven by rising energy production, a robust tourism sector (Dubai welcomed 19 million visitors in 2024), population growth (currently 12 million nationwide, 4 million in Dubai), and a steady pipeline of 3,500 infrastructure and real estate projects. High public spending and diversification efforts continue to mitigate external risks.
While US-imposed tariffs (25 per cent) on iron, aluminium, and steel introduce potential headwinds particularly for non-oil GDP, the UAE remains the second-largest aluminium supplier to the US, exporting 350,000 tonnes in 2024 contributing heavily to industries such as aerospace, defence, real estate, and automotive manufacturing. The recent announcement of a $1.4 trillion investment in the USA in a new aluminium smelter is expected to double domestic production, reinforcing trade stability.
Additionally, strategic trade diversification and the UAE's competitive positioning such as in logistics and finance help cushion any adverse effects.
Non-oil GDP has remained steady, supported by the government's diversification efforts. Continued growth is expected as these strategies expand further. Government initiatives continue to drive economic expansion, with plans to double FDI inflows to $65 billion by 2031 across logistics, finance, renewable energy, and IT. Dubai's Real Estate Strategy 2033 aims to increase housing supply and homeownership to 33 per cent while doubling the sector's contribution to GDP. The UAE's oil output is expected to hit 3.27 million barrels per day by 2026, in line with OPEC+ plans.
At the same time, Adnoc is working towards increasing production to five million barrels per day by 2027. The UAE's Dh71 billion fiscal budget for 2025, Dh28 billion has been allocated towards social development, pensions, education, and infrastructure with Dh2.6 billion set aside for transportation and logistics. Although fiscal surplus is expected to moderate to 3 per cent of GDP, sustained oil pricing and revenue diversification ensure stability. The IMF forecasts non-oil economic growth in the GCC to slow to 3.4 per cent, but the UAE remains a regional leader, outpacing Oman and Saudi Arabia with an expected 4.6 per cent growth through 2026.
While the recently imposed 25 per cent US tariffs on steel and aluminium directly target imports into the American market, they do not immediately affect the cost of construction materials in Dubai, as the UAE is not subject to reciprocal duties on its own imports. 'That said, currency fluctuations and broader economic uncertainty arising from global trade tensions may elevate input costs across sectors, including logistics and construction. However, these pressures may be mitigated or even offset by a surge in investor interest, as geopolitical instability elsewhere often reinforces Dubai's appeal as a haven for capital,' a recent whitepaper by Betterhomes, the Dubai-based real estate consultancy, said.
Dubai has become particularly attractive to Asian investors, especially from China, as they redirect capital flows away from unstable markets. Conversely, Dubai's strategic position as a global trade hub could create new opportunities, analysts said. The city may benefit from increased re-exports and transshipment activities, as companies seek to mitigate the effects of tariffs by rerouting goods through Dubai's free zones such as Jebel Ali Free Zone.
It is also worth noting that while the US maintains a free trade agreement with Canada and Mexico, the tariffs have still been imposed even though nearly one-third of US aluminium and steel imports come from Canada. Considering current political tensions with Canada and President Trump's recent efforts to strengthen ties with Gulf states including visits to Saudi Arabia, the UAE, and Qatar there is a strategic possibility that 'the US may pursue a bilateral deal with the UAE to reduce its reliance on Canadian metal imports', the Betterhomes study said. Such a deal could not only boost the UAE's aluminium export volumes to the US but also offer US a basis to lower tariffs on imports from Gulf partners, reinforcing economic and political alliances in the region, analysts say.
Dubai's real estate market has remained robust, with strong demand from Indian, European, Chinese, and Pakistani investors. Off-plan developments have drawn significant interest. Betterhomes experienced the same trend in Q1 2025, with Indian, Pakistani, British, Italian, and German buyers remaining the most active in the market. Following a strong Q1, total transactions in April surged by 23 per cent month-onmonth, reaching a total of Dh46 billion.
Real estate market outlook and future growth
Despite challenges posed by fluctuating oil prices and global market shifts, Dubai's real estate market remains resilient, benefiting from sustained foreign investment and economic diversification. The emirate has recorded the largest influx of millionaires globally, further solidifying its position as a haven for investment. Additionally, infrastructure projects, backed by government initiatives, continue to improve connectivity, supporting the ongoing expansion of the real estate market. In 2024, Dubai saw a steady increase in mortgage transactions, with significant demand for villas and townhouses. With 90 per cent of villa and townhouse communities experiencing demand exceeding supply, property values continue to rise, reinforcing Dubai's position as a top global real estate destination.
Louis Harding, CEO of Betterhomes says, 'At Betterhomes, we've observed a marked shift since the imposition of tariffs, with interest from US and Chinese investors rising by over 40 per cent month-on-month. Website traffic from these markets surged by 60 per cent, signalling a renewed appetite for Dubai real estate as a stable and strategic investment destination.'