(MENAFN- Khaleej Times)

The UAE's economy is poised for another strong year of growth in 2025, with the International Monetary Fund (IMF) projecting gross domestic product to expand by 4.8 per cent, well above the global average, as the nation's diversification strategy, fiscal strength, and investor confidence continue to underpin resilience.

The upbeat outlook reinforces the country's reputation as one of the world's most dynamic and stable economies amid global volatility.

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In its latest Article IV mission report, the IMF said the UAE's growth momentum is being driven by robust performance in non-oil sectors such as tourism, real estate, construction, and financial services, alongside a rebound in hydrocarbon output as Opec+ production increases. The Fund expects growth to accelerate further to around 5 per cent in 2026, while inflation remains modest at 1.6 per cent next year and about 2 per cent over the medium term.

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“The UAE has shown strong resilience to global uncertainty, regional tensions, and oil price fluctuations,” said Said Bakhache, who led the IMF mission to the UAE.

“Supported by sustained diversification and expanding exports, the UAE is projected to grow strongly, well above the global average in 2025.” He added that the country's ample fiscal and external buffers provide the flexibility to respond swiftly to shocks and maintain long-term stability.

The IMF noted that the UAE's current account balance strengthened further in 2024 on the back of higher exports of goods and services-particularly non-hydrocarbon exports-and slower import growth. It said the ongoing expansion of the UAE's Comprehensive Economic Partnership Agreements with key markets such as India, Indonesia, Türkiye, and South Korea would further deepen trade ties, bolster resilience, and enhance diversification.

The report highlighted the UAE's financial sector as“strong and sound,” supported by solid capital buffers, liquidity strength, and declining non-performing loans. Banks remain profitable, while conservative loan-to-value ratios and the introduction of a countercyclical capital buffer have helped mitigate potential vulnerabilities. Credit to the private sector continues to rise, and double-digit deposit growth has further strengthened funding.

The IMF also commended recent improvements in liquidity management through enhancements to the Dirham Monetary Framework, as well as the rollout of the Digital Dirham and new stablecoin regulations, calling them“important milestones in financial modernization.” The Fund said continued modernization efforts and regulatory vigilance would be key to managing risks while promoting financial innovation.

The UAE's real estate market, it said, remains buoyant, supported by strong population growth, foreign investor demand, and the country's appeal as a global safe haven. With banks' exposure to the sector down to about 18 per cent of risk-weighted assets and most transactions self-financed, systemic risks remain limited. The IMF cautioned, however, that potential reversals in capital flows or changes in sentiment warrant continued monitoring.

The report praised the UAE's ongoing structural reforms and investment in technology, infrastructure, and sustainability, noting that the country's rapid emergence as a global hub for artificial intelligence and innovation has positioned it at the forefront of the future economy. The Fund also lauded the UAE's efforts in climate adaptation, food security, and water management, and its progress on anti-money laundering reforms following its removal from the Financial Action Task Force's enhanced monitoring list.

Summing up, the IMF said the UAE's economic outlook remains“strong, confident, and forward-looking.” With prudent fiscal management, powerful sovereign buffers, and a reform agenda that blends innovation with stability, the country is set to remain a leading engine of regional and global growth well into the next decade.

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