The UAE’s economic outlook remains positive, with growth expected to stay around 4% in 2025, according to a recent assessment by the International Monetary Fund (IMF). This projection remains steady despite adjustments in oil production under Opec+ agreements.
The review highlighted that the country’s solid financial standing helps mitigate short-term risks. Meanwhile, ongoing developments in infrastructure and artificial intelligence are expected to boost productivity, creating opportunities for further expansion in the years ahead.
The IMF’s projection aligns with the World Bank’s estimates, reinforcing confidence in the UAE’s economic trajectory.
Drivers of Non-Oil Growth
Key sectors such as tourism, construction, and financial services continue to play a significant role in economic expansion. Public spending remains a driving force, while strong capital inflows, supported by business-friendly policies, contribute to sustained demand in the real estate market. These factors are keeping property prices on an upward trend across various segments.
Ali Al-Eyd, who led the IMF’s review after discussions with UAE officials, noted that non-oil industries are seeing consistent momentum, adding resilience to the broader economy.
Oil and Inflation Trends
Oil GDP is expected to expand beyond 2% in 2024, reflecting decisions within Opec+ to manage production levels. A measured approach to quota adjustments is also influencing forecasts.
Inflation is set to remain steady at around 2% in 2025, even as housing and utility costs rise.
Banking Sector Resilience
Banks in the UAE continue to demonstrate financial strength, supported by solid liquidity and capital buffers. Over the past few years, exposure to the property sector has declined, reducing potential risks tied to shifts in real estate values.
Banks remain well-capitalised, and asset quality has improved in 2024. Strong economic activity and demand for credit have contributed to stable profitability, even as interest rates remain elevated, according to Al-Eyd.
Between December 2021 and September 2024, the share of real estate-related exposure in banks’ portfolios dropped by four percentage points to 19.6%. This shift aligns with ongoing efforts by the Central Bank of the UAE to monitor financial institutions’ involvement in the sector, ensuring that property price fluctuations do not significantly impact balance sheets.
The Central Bank has introduced regulatory measures requiring lenders to refine their internal policies, strengthen risk assessment frameworks, and maintain responsible lending standards for real estate financing.
With interest rates beginning to ease in 2024 and further reductions anticipated in 2025, mortgage demand is also seeing an upward trend, reflecting growing confidence in the market.
Original article reference: Khaleej Times.
