The UAE is poised to outshine its Middle Eastern peers over the next few years, buoyed by a favorable oil output agreement with the Organization of the Petroleum Exporting Countries (OPEC) and a thriving services sector, according to a 2025 Outlook report from Swiss investment bank Lombard Odier.
The report highlights robust performance in the UAE’s real estate market, driven by an influx of international talent, booming tourism, and an increasingly favorable global interest rate environment. “The country’s healthy twin surpluses will also safeguard its economy from temporary shocks,” noted Dr. Nannette Hechler-Fayd’herbe, Lombard Odier’s head of investment strategy and sustainability.
However, geopolitical tensions, particularly the fraught situation between Israel and Iran, remain a significant risk. The report suggests that any de-escalation of regional conflicts under the influence of the U.S. administration could provide economic tailwinds for the UAE and Gulf Cooperation Council (GCC) economies.
Oil Production and Growth Forecasts
The anticipated reversal of voluntary oil production cuts by OPEC is set to boost GCC real GDP growth from under 2% in 2024 to over 4% in 2025. Dr. Hechler-Fayd’herbe predicts that GCC central banks will mirror U.S. Federal Reserve rate cuts as inflation remains well-controlled.
Despite this optimism, Saudi Arabia could face fiscal and current account deficits due to crude oil prices remaining below the levels needed to balance its budget. “In the medium term, however, we expect these adjustments to be manageable as recent reforms in tax, labor, and immigration bolster economic resilience,” the report states.
Global Economic Trends
Lombard Odier’s report also examines trends beyond the Middle East. In Europe, economic fortunes are expected to diverge in 2025. The European Central Bank is anticipated to cut rates to 1.25%, or further if growth slows sharply, with the euro likely to weaken against the U.S. dollar. Eurozone equities may underperform globally, although France’s stock market holds catch-up potential. German Bunds are projected to outperform in fixed income, while corporate bonds across the eurozone are preferred over sovereign debt.
In Central and Eastern Europe, disinflation is nearing its end, with growth expected to rebound in 2025. Poland’s central bank is likely to resume rate cuts early next year as inflation stabilizes, while Hungary and Czechia are nearing the end of their monetary easing cycles.
South Africa’s Modest Rebound
South Africa is experiencing economic stability following recent elections. The government’s medium-term budget policy has maintained a primary surplus despite revenue challenges, and extended periods without electricity blackouts have provided a boost. The economy is forecast to grow by 1.5% in the medium term, supported by two additional rate cuts of 25 basis points.
While global uncertainties persist, the UAE’s strategic positioning and proactive economic policies set it apart as a standout performer in the region.
