UAE can navigate global volatility, IMF says

• Emirates praised for diversification
• Economy outpacing regional neighbours
• Housing costs remain a concern

The International Monetary Fund has emphasised the UAE’s economic resilience during global and regional volatility in a slew of documents released this month.

The Gulf state’s push towards greater economic diversification and exports is driving the fastest growth in the region this year, “well above the global average”, the IMF said.

The Emirati economy is expected to expand by 4.8 percent in 2025 and 5 percent in 2026, further aided by the unwinding of voluntary oil output cuts by Opec+.

UAE GDP growth

Tourism, construction and financial services are the strongest non-hydrocarbon sectors as the UAE continues to attract foreign investment and workers. 

High housing costs remain the top concern for price levels, but consumer inflation is projected to remain between 1.6 percent this year and around 2 percent in the medium term, according to the fund. 

“Although regional and global uncertainty remains elevated, the UAE is well placed to navigate the ongoing global policy changes with broadly balanced risks to the outlook,” the IMF said upon completion of this year’s review of the Emirati economy under its Article IV process – effectively an annual health check.

In the final step of the process, the IMF’s executive board agreed with earlier findings and commended the UAE in striving to establish itself as a global centre for artificial intelligence and to expand bilateral trade agreements. 

IMF officials found in a separate study that the Gulf state has in the past decade become more integrated into the global economy through “financial, investment and trade linkages”, making it more vulnerable to external disruptions in commerce, interest rates and geopolitics. 

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Yet, the UAE has so far proven capable of managing these threats. “Financial markets and capital flows have been less affected by global shocks than their regional peers and other [emerging markets], reflecting strong investor confidence,” the IMF said. 

“The transmission of US monetary policy to domestic credit and growth has been limited in recent years,” it said. “The impact of global and regional uncertainty on trade and tourism appears contained.”

GCC countries can do more

In another new paper that looks at the wider GCC, the IMF called for more aggressive fiscal consolidation in the “medium to long term” for Bahrain, Kuwait, Oman and Saudi Arabia. 

However, it spared Qatar and the UAE, as the latter in particular leads the region in hydrocarbon and non-hydrocarbon growth, fiscal and current-account buffers, economic diversification and inbound foreign direct investment.  

Adel Hamaizia, managing director of Highbridge Advisory, said upon the launch of the study at the Doha Forum over the weekend that the UAE is the “bellwether” for the GCC.

“The UAE last year, an FDI global success story, right?” he said. “We’re talking about some $45 billion, 1,300 greenfield projects.”

Hamaizia said the UAE could unlock “plenty more upside potential” by streamlining legal and regulatory frameworks across its free trade zones, scrapping real estate requirements linked to corporate formation and bolstering its investment banking regime, among other measures.