World Bank upgrades UAE growth forecast to 4.6% this year on non-oil boost

The World Bank has upgraded its growth forecast for the UAE to 4.6 per cent this year, up from its 4 per cent projection in January, on expanding non-oil activity and phase-out of the Opec+ oil production cuts.

The Washington-based multilateral lender projects the UAE economy to grow at 4.9 per cent in 2026 and 2027, respectively, it said in its latest Global Economic Prospects report.

The Emirates’ economy is estimated to have expanded by 3.9 per cent last year, the lender said on Tuesday. In its January 2025 update, the World Bank estimated UAE growth for 2024 at 3.3 per cent.

The UAE has been focusing heavily on diversifying its economy from oil by developing sectors such as technology, manufacturing, tourism, trade and innovation.

The UAE’s economy grew by 3.9 per cent in 2024, the Central Bank reported in April, with the non-oil growth up 4.6 per cent. The banking regulator expects the country’s gross domestic product to expand at 4.7 per cent this year, with non-oil growth at 5.1 per cent.

Meanwhile, late last month oil producers group Opec+ agreed to increase its monthly output by 411,000 barrels per day for July, the same as in May and June, as part of its plans to gradually ease cuts.

In March, Opec+ said it would proceed with a “gradual and flexible” unwinding of voluntary production cuts of 2.2 million bpd, starting in April and moving until September 2026.

The planned return of production cuts – originally made by eight Opec+ members, including Saudi Arabia, Russia, the UAE and Iraq, in November 2023 – had been pushed back several times amid concerns about growing supply and dampening demand in the market.

Globally, the World Bank projects the economy to expand 2.3 per cent this year, about half a percentage point lower than estimates at the start of the year, it said in the report.

The global economy is set to suffer the consequences of heightened trade tension and policy uncertainty, with the World Bank estimating the pace of growth to fall to the slowest level since 2008 outside of global recessions.

The turmoil caused by the US's bid to levy historic tariffs on global trade has resulted in “growth forecasts being cut in nearly 70 per cent of all economies – across all regions and income groups”, the lender said.

A global recession is not expected. However, if forecasts for the next two years materialise, average global growth in the first seven years of the 2020s will be the slowest of any decade since the 1960s.

Meanwhile, growth in Gulf countries is forecast to increase to 3.2 per cent in 2025, 4.5 per cent in 2026, and 4.8 per cent in 2027, the World Bank said.

“The phase out of Opec+ oil production cuts starting in April 2025 is expected to lead to rising oil production, despite projected lower oil prices amid weakening global demand,” according to the lender.

“Growth is also anticipated to continue to be boosted by expanding non-oil activity, particularly in the manufacturing, construction, and services sectors, in several economies, including Bahrain, Kuwait, Oman, and the UAE.”

The World Bank expects growth in Saudi Arabia to increase to 2.8 per cent this year on “a gradual expansion of oil production”, the report said.

However, the forecast for 2025 has been downgraded by 0.6 percentage point, mainly because of expected lower oil prices and fiscal revenue leading to lower export proceeds, as well as heightened uncertainty curbing investment, the lender forecasted.

Among oil exporting countries, further declines in crude prices from slower global growth and weaker demand from major export destinations, including China, could increase fiscal pressures and diminish growth prospects, the lender said.

"While the phase-out of oil production cuts by Opec+ members will benefit growth in oil exporters, lower oil prices could lessen the positive effects, including on revenue collection," it said.