The UAE's economy expanded by 3.9% in 2024, according to its central bank, fuelled by strong growth in the country's non-oil sectors as the second-largest economy in the Arab world continues its push for diversification.

This growth was 1 percentage point lower than the central bank's previous estimate of 4%.

The banking regulator projects the country's GDP to grow by 4.7% in 2025 and 5.7% in 2026, according to its 2024 annual report released on Monday.

The non-oil economy grew by 4.6% last year and is expected to reach 5.1% this year, as per data from the UAE Central Bank.

The country’s hydrocarbon GDP, which shrank by 3.1% in 2023, grew by 1.6% last year. The central bank expects the oil economy to expand by 3.6% this year and by 8.5% the following year.

Furthermore, headline inflation in the country is estimated to have reached 1.7% last year and is projected to rise to 2% this year, according to central bank data.

The growth in 2024 was “supported by a robust non-hydrocarbon sector performance and gradual recovery in hydrocarbon activities”, while 2025 growth will be “driven by strengthening performance across both hydrocarbon and non-hydrocarbon sectors”, the report stated.

“The energy sector is expected to benefit from the planned easing of production cuts starting in Q2 2025, while the non-hydrocarbon sector continues to gain from government initiatives supporting foreign investment and economic diversification”, and these trends, “combined with increased oil and gas production”, will further drive growth next year, it added.

The UAE has been placing significant emphasis on diversifying its economy away from oil by developing sectors such as technology, manufacturing, tourism, trade, and innovation, The National reports.

Indeed, the country has implemented various reforms, including longer-stay residence visas and new visa categories, to attract more talent.

In addition, the UAE's non-oil foreign trade reached a record Dh3 trillion ($816.9 billion) last year, marking a 14.6% year-on-year increase.

Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, stated last month that the Comprehensive Economic Partnership Agreements (CEPA) with various countries, from Colombia to Australia, have contributed Dh135 billion to the UAE's non-oil trade with its partners, marking a 42% increase compared to the previous year.