UAE Economy to Grow by 4.8% in 2025 driven by Trade and Tourism

UAE Economic Forecast 2025

The UAE economy is projected to grow by 4.8% in 2025, according to the latest ICAEW Economic Insight report by Oxford Economics. The report analyzed by Khaleej Times highlights that the UAE’s foreign trade and tourism would serve as key drivers for the country’s economic growth. For the first time, the UAE’s foreign trade surpassed Dh3 trillion in 2024, which serves well for the economic forecast of the UAE in 2025. The UAE’s foreign trade expanded by an impressive 14.6% in comparison to global trade, which grew by just 2%. 

Thanks to numerous Comprehensive Economic Partnership Agreements (CEPA), trade will play a major role in the UAE’s economic growth, while the tourism sector, which is the region’s fastest-growing sector in 2024, will continue to remain vital for growth and diversification. In 2025, UAE consumer spending is also set to increase by 13% as a result of greater disposable income, with consumers below 45 driving the spending surge across retail segments.

Furthermore, the UAE’s economy will also be supported by increased oil production quotas from OPEC+. This will result in a higher production quota of 3.5 million barrels of oil per day, driving the growth of the oil sector by 4.8%. This, in turn, will support the UAE’s total GDP growth (oil and non-oil) will reach 5% in 2025 and 4.9% in 2026, according to S&P Global Ratings. Earlier, the IMF predicted the UAE GDP and economy to grow by 4% in 2025. Likewise, the strong demand in trade, tourism, and finance will support the economic momentum as inflation will remain stable at 1.9% in 2025. 

EU-UAE Trade Relations

To strengthen ties between the UAE and the European Union (EU), a delegation visited Belgium for discussions on enhancing economic ties and fostering investment opportunities between the EU and the UAE. The EU remains the second-largest global trade partner of the UAE, with non-oil trade reaching $67.6 billion in 2024. It marks a 3.6% increase from 2023 and a rise of 18.1% from 2022. The contribution of the EU to the UAE’s total non-oil foreign trade now accounts for 8.3%. Within the EU, Germany is the UAE’s second-largest trading partner with non-oil trade between the two nations reaching €12.8 billion in 2024, an increase of 5.4% from the previous year and nearly double the global trade growth average. More notably, the UAE is seventh among the top 10 destinations where German millionaires plan to relocate in the next 12 months.

UAE Non-Oil Sector Growth in 2025

The UAE, along with Saudi Arabia, is expected to lead non-oil sector growth, at 4.8% and 5.8% respectively. Hanadi Khalife, Head of the Middle East at ICAEW, stated that despite global economic uncertainties, due to the U.S. tariff policies, the business environment in the Gulf countries continues to demonstrate adaptability and resilience thanks to investments in tourism and infrastructure, which are providing new growth opportunities. On similar lines, Scott Livermore, ICAEW economic adviser and Managing Director at Oxford Economics Middle East, states that the projected 4% growth for the GCC in 2025 underscores the region’s resilience to external challenges while continuing its diversification initiatives.

UAE’s National Investment Strategy 2031 to Foster Growth

Earlier this month, the UAE leadership approved the National Investment Strategy 2031 to foster economic growth. The key strategic initiative will focus on key sectors of the economy, such as logistics, financial services, information technology, and renewable energy, to boost the foreign direct investment (FDI) share of total investments to over 30% and its contribution to the UAE economy and GDP to 8%. Sheikh Mohammed announced the UAE’s ambitious goal to double annual FDI inflows to Dh240 billion by 2031, increasing total foreign investment stock to Dh2.2 trillion.

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