World Bank raises UAE growth forecast for 2025 and 2026

The World Bank has raised its economic growth forecasts for the UAE for 2025 and 2026, citing robust expansion in both hydrocarbon and non-oil sectors. This growth is expected to offset the negative impact of weakening global demand and lower oil prices.

According to the World Bank’s latest Global Economic Prospects report, released on Tuesday, the UAE’s GDP growth forecast for 2025 has been revised upwards by 0.6 percentage points to 4.6 per cent, while the 2026 forecast was increased by 0.8 percentage points to 4.9 per cent. The Bank also projects a 4.9 per cent economic expansion in 2027.

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Growth across the GCC region is also expected to accelerate, reaching 3.2 per cent in 2025, 4.5 per cent in 2026, and 4.8 per cent in 2027.

“The phase-out of Opec+ oil production cuts starting in April 2025 is expected to lead to higher oil output, despite anticipated lower oil prices driven by weak global demand. Growth will also continue to be supported by expanding non-oil sectors — particularly manufacturing, construction, and services — in economies including Bahrain, Kuwait, Oman, and the UAE,” the World Bank stated.

In April, Opec+ surprised markets by announcing a larger-than-expected increase in oil output for May, despite weak prices and subdued demand. The group’s decision to extend the 411,000 barrels-per-day production increase into June raised concerns about a potential global supply surplus.

In a separate projection released earlier this year, the International Monetary Fund (IMF) estimated the UAE’s GDP would grow by four per cent in 2025 and five per cent in 2026.

Meanwhile, UAE Minister of Economy Abdullah bin Touq Al Marri stated that he expects the economy to grow by 5-6 per cent in 2025, fuelled by strong performance in key sectors such as technology, renewable energy, trade, financial services, and infrastructure.

Slowing but no recession

Globally, the World Bank warned that escalating trade tensions and policy uncertainty are expected to slow growth in 2025 to its weakest pace since 2008 – excluding official recessions.

Growth forecasts have been revised downward for nearly 70 per cent of countries worldwide, across all regions and income levels. The Bank now expects global GDP to grow by just 2.3 per cent in 2025 – almost half a percentage point lower than earlier projections.

“A global recession is not expected,” the report said. “However, if these forecasts hold, average global growth during the first seven years of the 2020s will be the slowest of any decade since the 1960s.”

Indermit Gill, chief economist at the World Bank, noted a concerning long-term trend for developing countries. “Outside of Asia, the developing world is becoming a development-free zone. Growth in developing economies has declined steadily – from six per cent annually in the 2000s, to five per cent in the 2010s, and now to under four per cent in the 2020s.”

This downward trend parallels a decline in global trade growth, which has slowed from an average of five per cent in the 2000s to below three per cent in the current decade. Investment growth has also weakened, while global debt levels have surged to record highs.

In 2025, growth is expected to decelerate in nearly 60 per cent of developing economies, with average growth projected at 3.8 per cent. This figure is forecast to rise slightly to 3.9 pe cent in 2026 and 2027 – still more than a full percentage point below the average growth seen during the 2010s.

For low-income countries, the World Bank projects a 5.3 per cent growth rate in 2025, marking a 0.4 percentage point downgrade from previous forecasts. At the same time, higher tariffs and tight labor markets are pushing global inflation upwards, with prices expected to rise by an average of 2.9 per cent – remaining above pre-pandemic levels.

Nonetheless, the World Bank notes that global growth could rebound more quickly if leading economies successfully reduce trade tensions and navigate policy challenges.

Waheed Abbas

waheedabbas@khaleejtimes.com

Waheed Abbas is Assistant Editor, covering real estate, aviation and other business stories that directly affect the lives of UAE consumers. He frequently reports human interest stories, too.