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UAE to bounce back next year, achieve pre-war growth rate, says global think-tank
The UAE economy is expected to slow in 2026 amid geopolitical conflict but rebound strongly from 2027, with growth projected to reach 5.2% in 2027 and 6% in 2028, according to the IIF
- PUBLISHED: Tue 19 May 2026, 4:20 PM
The UAE economy is expected to bounce back strongly in the post-conflict years after a slowdown in 2026, achieving pre-war growth rates, according to a global think-tank, following a stress test of the economy.
A note titled “Stress tested, not broken: The UAE after the Iran war” issued by the Institute of International Finance said that despite pressure from geopolitical conflict on non-oil sectors, Dubai retains strong structural advantages, including advanced infrastructure, regulatory flexibility, global connectivity, and a diversified services base.
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It projected that the UAE economy will rebound strongly in the post-conflict years after a slowdown in 2026, with Dubai strengthening its role as a regional hub for travel, tourism, finance, and trade.
The Institute of International Finance said the UAE’s real GDP will rise to 5.2 per cent in 2027 and grow further to 6.0 per cent in 2028.
“Overall growth is expected to weaken in 2026 as hydrocarbon output declines and non-hydrocarbon activity decelerates. Nevertheless, substantial fiscal and financial buffers give the authorities considerable policy space to maintain spending, support liquidity, and preserve confidence in the financial system. The UAE’s strong external asset position and sovereign credit profile further mitigate vulnerability to external shocks. Dubai is likely to experience the sharpest near-term slowdown, while Abu Dhabi’s fiscal strength and investment programme help stabilise the national outlook. From 2027 onwards, improving regional stability, recovering tourism and trade, rising energy production, and renewed capital inflows are expected to support a gradual rebound,” the think-tank said.
It added that higher oil prices would help offset lower export volumes, while large sovereign wealth funds and strong fiscal capacity provide room to sustain public investment. Strategic projects in energy, petrochemicals, manufacturing, and technology are expected to continue largely uninterrupted, cushioning the national economy against cyclical weakness elsewhere.
Over the medium term, Abu Dhabi’s expanding oil and gas production capacity reinforces its position as the UAE’s primary fiscal and economic anchor, it said.
Historically, the Institute of International Finance said Dubai has demonstrated a strong ability to rebound after geopolitical and external shocks once confidence stabilises. As regional conditions improve, Dubai is expected to resume its role as the region’s leading hub for tourism, aviation, trade, logistics, and financial services in 2027 and beyond.
While investors are likely to apply a somewhat higher geopolitical risk premium going forward, the emirate’s core economic model remains fundamentally attractive.
“As regional conditions stabilise, the emirate is expected to regain momentum and resume its role as the region’s leading hub for tourism, trade, logistics, and financial services from 2027 onward,” the IIF said.
Therefore, it said the “UAE can absorb a large shock without destabilisation.”
According to the 2026 Annual Report released by Global SWF, the UAE’s state-owned investors (SOIs) have $2.931 trillion (Dh10.75 trillion) in assets under management, making the country the fourth richest in the world.
Abu Dhabi had $1.7 trillion in assets managed by its various SWFs headquartered in the city; therefore, the city was named ‘Capital of the Capital’.
