The United Arab Emirates’ non-oil economy is expected to grow at an accelerated pace of 5.5% this year, up from 5% in 2024, according to a new report by Capital Economics. The growth is being fuelled by robust performance in key sectors including tourism, retail, real estate, and private credit, signalling continued momentum in the country’s economic diversification drive.
James Swanston, senior economist for the Middle East and North Africa at Capital Economics, said the UAE’s non-oil sector has maintained strong momentum so far in 2025. “Tourist arrivals, retail activity, and credit growth have all remained resilient, and these trends are likely to support further gains in non-oil GDP this year,” he noted in the firm’s latest country analysis.
In contrast, the UAE Central Bank had earlier projected a slightly more conservative non-oil GDP growth of 4.4% for both 2025 and 2026 in its second-quarter report. However, the bank echoed confidence in the underlying economic strength, citing national strategic initiatives such as ‘We the UAE 2031’ which prioritise foreign investment, innovation, and development of non-hydrocarbon sectors like manufacturing, logistics, and the digital economy.
The UAE’s non-oil economy has shown impressive post-pandemic recovery, particularly in real estate, aviation, tourism, and retail—sectors that have also contributed to a population increase, reaching a historic high.
Private credit, particularly mortgage lending, has also supported growth. Although mortgages currently account for only 20% of total home sales, the figure is rising and could expand further due to new government-backed initiatives aimed at improving access for first-time buyers.
Looking at the broader economic picture, Capital Economics forecasts the UAE’s overall GDP to grow by 5.8% in 2025 and reach 6.5% in 2026. This includes a projected sharp rebound in the oil sector following recent OPEC+ decisions to ease production cuts.
“Oil output is expected to rise by 16% to 3.4 million barrels per day by the end of 2025, with an additional 7% growth in 2026,” Swanston said, adding that this increase would outpace that of most other Gulf states.
Moreover, the UAE’s strong fiscal position — with a budget surplus of 4.8% of GDP — provides ample room for the government to maintain supportive fiscal policies in the years ahead.
The combination of strong non-oil sector activity, recovering oil production, and a stable financial position positions the UAE for one of the highest growth trajectories among Gulf economies through 2026.
