UAE economy to grow to 4.8 percent in 2025

Scott Livermore, economic adviser, chief economist and managing director of Oxford Economics Middle East, forecasts that the UAE economy will grow to 4.8 percent in 2025.

In a statement to Emirates News Agency (WAM), Livermore attributed this to the expansion of the non-oil economy, which is estimated to grow by 4.6 per cent year-on-year in 2024.

He added that non-oil sectors, mainly travel and tourism, will continue to grow strongly, with visitor numbers to Dubai and traffic at DXB reaching record levels. “We expect visitor numbers to continue to grow strongly, increasing by more than 20 per cent this year and achieving double-digit growth next year,” he said.

Livermore added that the country is facing some challenges, particularly significantly higher interest rates; the country’s economy has weathered the challenge thanks to the government’s support in implementing growth and diversification plans.

“Investment activity in the UAE is expected to be strong as plans for the ‘We, UAE 2031’ strategy, D33 Dubai and others are being implemented,” he explained.

He also stressed that the UAE is becoming increasingly attractive to foreign investors and talent thanks to programs such as allowing 100 percent foreign ownership in onshore companies and reducing the cost of setting up businesses, which has contributed to population growth and boosted the real estate market.

He noted that policymakers are also focusing on innovative and emerging sectors such as finance, creative industries, manufacturing and other sectors.

Referring to the US Federal Reserve’s interest rates, Livermore said: “We expect the Federal Reserve to cut interest rates in September and shift its focus from inflation to the labor market. The Federal Reserve is no longer as focused on inflation, and labor market risks are on its radar.”

“We expect the Fed to cut rates by 50 basis points by the end of 2024 and 150 basis points by the end of 2025, but the rate cuts could be more pronounced upfront if the labor market deteriorates more markedly than we assume.”

Livermore also expects the global economy to grow by 2.7 percent this year and next, noting: “We believe growing concerns that the United States may be heading into a recession are unfounded and we think recent news continues to point to a more orderly and milder slowdown in economic growth.”

Meanwhile, the latest ICAEW Economic Insight report on the Middle East, prepared by Oxford Economics, shows that the Gulf Cooperation Council (GCC) region is poised for a significant rebound, with economic growth set to more than double to 4.4 per cent in 2025.

The report highlights that while economic growth in the Middle East is forecast at 2.1% in 2024, a significant acceleration to 3.7% is expected in 2025.

The report highlights the resilience of non-energy sectors in the Gulf Cooperation Council, which is set to grow by 4.2% this year and 4.4% in 2025.

Recent PMI readings suggest strong domestic activity, and anticipated interest rate cuts are expected to further boost consumption and private investment. These sectors, including tourism, trade and finance, are emerging as key growth drivers in the region’s economic diversification efforts.

Scott Livermore, ICAEW Economic Advisor, Chief Economist and Managing Director of Oxford Economics Middle East, said: “The GCC’s proactive and strategic investment in non-oil sectors, together with the gradual recovery in oil production, paves the way for solid growth in 2025, where the GCC’s resilience will be most evident.”

Hanadi Khalife, ICAEW Middle East Head, said: “The report highlights the importance of resilience in coping with global economic and regional geopolitical headwinds. We are confident that the Middle East business community, supported by the expertise of the accountancy profession, will continue to demonstrate its ability to innovate and thrive amid these challenges.”

Meanwhile, Alia Bint Abdulla Al Mazrouei, Minister of State for Entrepreneurship in the UAE, recently hosted a roundtable with 20 venture capital fund directors and CEOs. The meeting aimed to strengthen cooperation to support the development of the UAE entrepreneurship ecosystem and the growth of startups by promoting their expansion into new sectors of the economy. This will be achieved by equipping them with the necessary skills to increase their chances of obtaining funding, partnerships, investment opportunities and engaging with domestic and foreign investors.

Agencies