Abu dhabi: The International Monetary Fund (IMF) staff recently concluded their visit to the United Arab Emirates, noting the country's robust economic resilience amid ongoing geopolitical conflicts in the Middle East. The IMF praised the UAE's solid economic fundamentals, policy buffers, and swift policy responses that have mitigated the impact of regional tensions.
According to International Monetary Fund, the UAE's timely and well-targeted support measures have been instrumental in maintaining financial stability, safeguarding essential supply chains, and supporting affected sectors and households. These measures have also sustained market confidence, reflecting the UAE's institutional capability to manage major external shocks effectively.
Despite the ongoing uncertainty surrounding the conflict's duration and intensity, as well as intermittent closures of the Strait of Hormuz impacting economic activity, the UAE economy is expected to recover in the latter half of the year. This recovery is anticipated as exports rebound and OPEC+ quotas cease to constrain the economy. The IMF projects a robust expansion in 2025, although overall GDP might experience a slight dip in 2026 due to a slowdown in non-hydrocarbon sectors such as tourism, transportation, trade, and real estate.
The IMF's outlook for 2027 is optimistic, predicting a strong rebound as hydrocarbon production increases and non-hydrocarbon activities recover, bolstered by normalizing tourism and trade flows. Inflation is expected to rise slightly in 2026 due to higher global energy and food prices, but it should gradually ease in the medium term.
The UAE's general government fiscal balance is projected to remain in surplus in 2026, supported by favorable oil revenues and prudent budgeting practices. Although the surplus is expected to narrow, high oil prices, early dividends, and expenditure-efficiency measures will help counterbalance revenue pressures from weaker non-oil activities. Public and private sectors are well-prepared to withstand the conflict's impact due to strong profitability, prudent balance-sheet management, and improved liquidity.
Financial conditions in the UAE have remained broadly resilient, though there has been some softening in the real estate sector. Banks are adequately capitalized with sufficient capital buffers and ample liquidity, despite some tightening since the conflict began. Real estate activity has moderated in early 2026 after years of strong growth, with prices generally holding steady at or above 2025 levels.
The IMF emphasized the need for agile economic policies to maintain stability and mitigate the conflict's economic impact. Continued diversification and structural reforms are crucial for sustaining growth, with deeper trade integration and investments in technology and human capital reinforcing non-oil growth and resilience to external shocks.