08-07-2025
UAE non-oil economy to grow faster at 5.5% in 2025, led by tourism, retail, says report
UAE's non-oil economy is projected to grow faster this year at 5.5 per cent as compared to five per cent, driven by tourism, retail, real estate and private credit growth, according to Capital Economics.
'UAE's non-oil sector has seen a strong run of growth recently, and we think that robust activity in tourism and retail sectors, as well as solid credit growth, means that non-oil GDP growth will accelerate this year. So far this year, the non-oil sector has sustained strong growth,' said James Swanston, senior economist for the Middle East and North Africa region at Capital Economics.
'Alongside strong lending growth, tourist arrivals, and retail traffic, we have pencilled in non-oil GDP growth accelerating to 5.5 per cent this year, from 5.0 per cent,' he said in the country report.
In its second quarter 2025 report, the Central Bank of the UAE had projected 4.4 per cent non-oil sector growth for both 2025 and 2026.
'This sustained growth is primarily driven by the government's strategic plans and policies aimed at attracting foreign investment, fostering innovation and promoting key non-hydrocarbon sectors, such as industrial manufacturing, tourism, transport and the digital economy, which align with key national initiatives within the 'We the UAE 2031' vision,' said the Central bank.
After the Covid-19 pandemic, the UAE's non-oil sector has been growing exceptionally, especially the real estate, aviation, travel and tourism, retail and logistics. This has pushed the UAE's population to an all-time high.
Private credit growth strengthened, partly fuelled by mortgage lending. 'Admittedly, this only accounts for 20 per cent of all home sales, but the share has increased and could expand with a new initiative to help first-time buyers gain access to mortgages via banks.'
Overall, James Swanston of Capital Economics said GDP forecasted for the UAE will accelerate to 5.8 per cent this year and to 6.5 per cent in 2026.
'We expect the UAE's economic growth to accelerate over the coming quarters. For one thing, the oil sector is likely to record a sharp pick-up in output. While production has only increased by 0.1 million barrels per day since Opec+ began to unwind cuts in April, July's meeting has laid up for a more aggressive second half of the year and we expect the UAE's oil output to rise by 16 per cent to 3.4 million bpd by year-end and a further 7 per cent in 2026,' Swanston said, adding that this is a greater relative increase than other Gulf states.
Meanwhile, the UAE's strong balance sheet — as the country's public finance data showed a budget surplus of 4.8 per cent of GDP — means there is plenty of scope for fiscal policy to be kept loose.
