9.8% expected growth of the UAE economy next year

The Central Bank reported that the national economy continued to show high levels of flexibility during the year 2025, despite regional tensions and fluctuations in energy markets, supported by the strength of non-oil sectors and the continued implementation of economic diversification projects, while it expected economic growth to slow to 1.7% during the year 2026, stressing that this slowdown will be temporary, with expectations that the growth rate will rise to 9.8% in 2027.

The Central Bank confirmed the continued improvement of labor market conditions in the UAE, as the number of workers covered by the Wage Protection System (WPS) increased by 11.7% on an annual basis, until March 2026, and indicated that this growth reflects the continued expansion of demand for labor, driven by the continued growth of economic activity.

The Central Bank pointed out that average wages increased by 0.7% on an annual basis until March 2026, and indicated that the coincidence of the large increase in the number of workers with the limited increase in average salaries indicates the continued expansion of employment, especially in operational jobs with lower wages, in addition to the absence of tangible pressures on wage levels, which limits the transmission of the rise in the cost of labor to inflation rates.

This was stated in the “June 2026 Quarterly Economic Review” report, which the Central Bank issued yesterday, in which it said in detail: “The real GDP recorded a growth of 6.2% during the year 2025, driven by the growth of non-oil activities by 6.8%, while the oil sector grew by 4.3%.”

The report explained that the non-oil sectors, led by construction, financial services and insurance, wholesale and retail trade, real estate, and transportation and storage, were the main engine of growth, in a new confirmation of the success of the state’s strategy in diversifying the economy and reducing dependence on oil.

Despite the strong performance, the Central Bank expected economic growth to slow to 1.7% during the year 2026, as a result of the impact of regional developments on the movement of trade, shipping, tourism, and private sector confidence, stressing that this slowdown will be temporary, with expectations that the growth rate will rise to 9.8% in 2027, supported by an increase in oil production, and the continued growth of non-oil sectors, in addition to the strength of government spending and infrastructure projects.

The report also indicated that the UAE economy is based on strong financial foundations and a package of supportive government measures, including programs to enhance the flexibility of the financial sector, business support packages, and government investments, in a way that limits the effects of external challenges and maintains the confidence of investors and markets.

In the real estate sector, the UAE market continued its strong performance during the first quarter of 2026, as residential sector transactions in Abu Dhabi increased by 119.6% on an annual basis, driven by demand for new projects, while Dubai recorded a 30.3% growth in the total value of real estate transactions.

Non-oil foreign trade also continued to record record levels, as the trade volume rose to 3.568 trillion dirhams during 2025, an increase of 27.4%, while non-oil exports jumped by 47.8% to reach 801.1 billion dirhams, driven by an increase in exports of gold, jewelry and aluminum.

Regarding prices, the Central Bank expected the inflation rate to reach 2.3% in 2026, before falling to 1.9% in 2027, stressing that inflation in the UAE will remain below the global average.

As for the banking sector, it maintained its strength, as the Central Bank kept the base rate at 3.65% in line with US monetary policy, while bank assets rose to 5.56 trillion dirhams at the end of the first quarter of 2026, with the loan portfolio growing by 20.3%, deposits by 17.4%, and asset quality improving with the net non-performing loan ratio decreasing to 1.5%, which reflects the strength of the UAE financial system and its ability to support economic activity.

The insurance sector in the UAE also continued its strong performance during the first quarter of 2026, supported by an increase in written insurance premiums, compensation paid, and technical provisions, in addition to improved financial solvency and profitability indicators.

Data issued in the Central Bank’s report showed an increase in total written insurance premiums by 15.1% on an annual basis, reaching 27.5 billion dirhams at the end of the first quarter, compared to the same period last year.

In contrast, total compensation paid increased by 14.5% year-on-year to 12.6 billion dirhams.