UAE GDP to Grow 4.0% in 2025 Driven by Non-Oil Sectors

- Josh Gilbert, Market Analyst at eToro

Following a successful visit by the U.S. President, attention has turned to the economic prospects of the United Arab Emirates (UAE) in 2025. The outlook is broadly positive, with the nation expected to maintain robust growth momentum. This is underpinned by strong domestic activity and a strategic drive to diversify away from oil dependence. Both domestic forecasts and international institutions, such as the International Monetary Fund (IMF), are optimistic. The IMF anticipates GDP growth of 3.8% in 2024, rising to 4.0% in 2025—one of the highest in the Gulf region. In contrast, Saudi Arabia is projected to grow by about 3% in the same period. A key reason behind this optimism is the UAE’s vibrant non-oil economy, even as oil output sees a modest recovery.

Non-Oil Sectors Powering Growth

In 2024, several non-oil industries emerged as leading growth contributors. Tourism, transportation, finance, construction, real estate, and communications all experienced solid expansion. These sectors highlight the UAE’s ongoing transition toward a more diverse and resilient economy. The country’s strategy has shifted from reliance on hydrocarbons to cultivating a broader economic base, with non-oil activity at the core of its long-term growth plans.

Tourism and Infrastructure Boost Domestic Demand

The tourism sector continues to be a powerful engine of growth. With international visitor numbers on the rise, the travel and tourism industry is projected to contribute approximately 13% to the UAE’s GDP in 2025. Record-high tourist spending has further solidified the sector's importance. Large-scale infrastructure projects—such as airport expansions, new ports, and cultural attractions—are bolstering domestic demand and foreign investment. These developments build on the momentum created by Expo 2020, which significantly elevated the UAE's global visibility. Supporting this growth is the ample financial capacity of sovereign wealth funds, which are actively investing in future-forward industries, including renewable energy, logistics, and advanced technology.

A New Hub for Digital Economy and AI

Among the most transformative trends is the UAE’s rapid advancement in the digital economy. The government has made targeted investments in artificial intelligence (AI), digital infrastructure, and emerging technologies. These moves are laying the foundation for innovation-led growth. Recently, a visit by former U.S. President Donald Trump drew attention to the region's tech ambitions, including plans for the world’s largest AI data centre outside the United States, set to be built in Abu Dhabi. This initiative positions the UAE as a key global player in the AI sector and presents new opportunities for tech-related investments in the region.

Expanding Trade and Green Economy Initiatives

While global trade faces uncertainty due to tariffs and geopolitical tensions, the UAE has quietly expanded its global trade footprint. Non-oil trade hit a record AED 2 trillion in 2024, a 15% increase from the previous year. This surge has been aided by the signing of Comprehensive Economic Partnership Agreements (CEPAs), which open access to high-growth markets across Asia and Africa. Simultaneously, the UAE is prioritizing sustainability, with major investments in clean energy and green technology. A national goal to triple renewable energy capacity by 2030 underpins its net-zero strategy, while also creating new industries and employment opportunities.

Risks and Resilience in the Year Ahead

Years of economic diversification have reduced the UAE’s reliance on oil revenues. With strong fiscal reserves, bolstered by oil surpluses in boom years, the country remains well-insulated against potential shocks. However, oil prices still represent a key risk. In 2024, prices fell by approximately 15%, influenced by OPEC+ production increases and decreased demand from China due to trade tensions. A further decline could limit public and private investment in non-oil sectors, slowing the diversification agenda. Nevertheless, the UAE remains attractive to investors, offering a unique mix of high-growth sectors like tourism, technology, and infrastructure, supported by sound macroeconomic management.