UAE Economy to Grow 4.9% in 2025, 5.3% in 2026: CBUAE

Dubai, UAE - September 19, 2025 - The UAE’s economy is set to experience robust growth over the next two years, according to the latest quarterly outlook released by the Central Bank of the UAE (CBUAE). The central bank projects the economy to expand by 4.9% in 2025, up from a previous forecast of 4.4%, and 5.3% in 2026.

This growth will be driven by strong momentum in the non-oil sectors and a sharp increase in oil production following updated OPEC+ plans.

Strong Start to 2025

During the first quarter of 2025, the UAE’s economy grew by 3.9% year-on-year, supported by a significant 5.3% rise in non-hydrocarbon GDP. Key contributors to this growth include manufacturing, financial services, construction, and real estate.

The non-oil economy is forecast to grow by 4.5% in 2025 and 4.8% in 2026, while the hydrocarbon sector is projected to rise 5.8% in 2025 and 6.5% in 2026.

Inflation Revised Downward

Inflation dropped to 0.6% in Q2 2025, primarily due to lower energy prices. As a result, CBUAE lowered its 2025 inflation forecast to 1.5%, down from 1.9%.

Inflation is expected to edge up slightly to 1.8% in 2026, attributed to base effects. Stable liquidity conditions, healthy deposits, and steady credit growth are also supporting the economy.

The banking sector remains resilient, with strong capital buffers and improved asset quality. Sovereign risk levels remain low, reflecting investor confidence in the UAE’s economic outlook.

Employment and Consumption

In June 2025, the number of employees covered by the Wages Protection System (WPS) rose 10.6% year-on-year, while average wage growth remained modest at 0.2%.

This rise in employment supports robust consumption growth while keeping wage-driven inflation pressures contained.

Real Estate and Tourism Performance

The UAE’s residential sales market remained strong in the first five months of 2025:

• Residential sales transactions rose 13.7% year-on-year
• Off-plan sales increased 14.3% annually, showing continued investor demand
• Ready unit sales climbed 12.5% annually

However, rental transactions in Abu Dhabi and Dubai fell 4.2% year-on-year during the same period.

The tourism sector also saw robust performance:

• Dubai welcomed 9.9 million international overnight visitors, up 6.1% from H1 2024
• Abu Dhabi and Dubai airports handled 15.8 million and 46 million passengers respectively in H1 2025

CBUAE Cuts Interest Rates

Following the U.S. Federal Reserve’s move, CBUAE cut the base rate on the Overnight Deposit Facility (ODF) by 25 basis points to 4.15%, effective September 18, 2025.

The Dirham Overnight Interest Average (DONIA) rate averaged 9 basis points below the base rate, an improvement from the previous quarter.

Banking Sector Growth

The UAE’s banking sector recorded a net increase of AED 43.6 billion ($11.86 billion) in Q2 2025, primarily driven by foreign asset growth.

Key banking highlights:

• Deposits increased 13.1% year-on-year
• Loan portfolio grew 11.1% year-on-year
• Capital adequacy ratio stood at 17.3%
• Net Non-Performing Loan (NPL) ratio declined to 1.7%

The insurance sector also expanded significantly, with gross written premiums up 14.5% year-on-year. The ratio of own funds to Minimum Capital Requirement improved to 423%, up from 376% in Q2 2024.

Capital Markets Show Strength

The UAE capital markets demonstrated strong growth:

• Dubai Financial Market (DFM) index surged 35.6% year-on-year
• Abu Dhabi Securities Market General Index rose 8.1% year-on-year
• Credit default swap spreads for Abu Dhabi and Dubai remained low

These indicators highlight strong investor confidence in the UAE’s financial stability and economic trajectory.

The report confirms that the UAE is entering a phase of sustained, diversified growth, fueled by non-oil sector expansion, strategic investments, and global market confidence.