The UAE is set to spearhead economic growth in the Middle East and Africa for the second year in a row in 2025, with an anticipated $15 billion (Dh55 billion) in portfolio inflows, underscoring its status as a regional financial hub and the strength of its diversified economy.
This is according to a report by global think-tank, the Institute of International Finance (IIF).
“The UAE remains the main regional destination of FDI inflows, attracting about $30 billion in 2023 – 6% of the UAE's GDP, the highest among emerging economies. The friendly business environment, excellent infrastructure, and diversified economy by regional standards have supported the elevated FDI,” said Marcello Estevão, managing director and chief economist at IIF.
"The strong UAE appeal to international investors can be attributed to a confluence of strategic reforms, including the allowance of 100% foreign ownership in specific sectors, enhanced intellectual property protections, and streamlined licensing procedures,” he added.
Estevão forecast that the UAE's GDP will expand by 4.0% in 2024 and 5.1% in 2025, marking the highest growth rates in the Middle East and Africa, Khaleej Times reports.
He also noted that the UAE Central Bank has implemented robust regulations for digital currencies, attracting international investors and bolstering trust in digital currency markets.
“The issuance of digital currency is part of the UAE's roadmap for 2023-2026,” he said.
Furthermore, the UAE, along with Qatar and Kuwait, is expected to maintain substantial current account surpluses, though slightly smaller than those recorded in 2023-24, the report added.
In addition, the six Gulf Cooperation Council (GCC) countries have managed to navigate global challenges and the Middle East conflict effectively.
“However, the large current account and fiscal surpluses that helped cushion past shocks have started to narrow amid falling oil revenues and large investment-related imports needed to diversify their economies away from oil. We see overall growth (hydrocarbon and non-hydrocarbon) rebounding from 0.9% in 2024 to 3.5% in 2025, as the oil production cuts of the past two years gradually unwind beyond Q1 2025,” according to IIF economists.
“Considerable progress has been made in improving the business climate, particularly in Saudi Arabia and the UAE, which, combined, account for 75% of total GCC output. Progress has been made in diversifying GCC economies away from oil, as signalled by the steady decline in the hydrocarbon sector's contribution to real GDP. Digitalisation and AI continue to play a key role in the economic diversification strategy,” IIF added.