UAE Economy Projected as Fastest Growing in the Region by 2025, World Bank Forecasts

The World Bank expects the UAE economy to grow 4.8% this year, the highest among regional economies, driven mainly by non-oil sectors that could expand 5.2%. The growth is expected to reach 5% on average in 2026-2027, supported by the country's economic diversification efforts where non-oil sectors now contribute 75.5% of real GDP.

The World Bank's latest "Gulf Economic Update" report shows the UAE leading Gulf Cooperation Council countries in economic growth projections. Saudi Arabia follows at 3.8%, Bahrain at 3.5%, Oman at 3.1%, Qatar at 2.8%, and Kuwait at 2.7%.

Here's what's driving the UAE's strong performance: The country recorded 3.9% growth in the first quarter of 2025, powered by non-oil activities growing at 5.3%. Key sectors like manufacturing, financial services, insurance, construction, tourism, aviation, and transport are all contributing to this momentum.

The economic outlook looks stable across multiple indicators. Inflation is expected to remain steady at 2% through 2027, while unemployment stays relatively low compared to other Gulf states. The employment-to-population ratio reached 76.2% in 2025, reflecting increased workforce participation, especially among women.

The UAE's fiscal position remains strong with an expected budget surplus averaging 5% of GDP over the medium term. This stability comes from the country's massive sovereign wealth funds, ranked among the world's largest, which provide substantial financial reserves and long-term revenue streams that reduce fiscal risks.

Foreign investment continues flowing into the UAE at record levels. The country attracted over $45.6 billion in foreign direct investment in 2024, primarily targeting business services, technology, financial services, transport, storage, telecommunications, and consumer products sectors.

What makes the UAE attractive to investors? The government's ambitious policies supporting high-value non-oil investments in artificial intelligence, cybersecurity, and cloud computing play a big role. But it's also the country's reputation as a business-friendly hub, backed by investor-friendly regulations and visa policies designed to attract global talent, all within a politically and economically stable environment despite regional tensions.

The World Bank report emphasizes digital transformation as a key driver of economic diversification across Gulf states. The UAE is leading this charge, quickly establishing itself as a global digital transformation leader through ambitious national strategies, strong institutional coordination, and world-class digital infrastructure.

The numbers back this up: The UAE ranks 12th globally in technological infrastructure indicators, reflecting strong capabilities in advanced digital technologies and connectivity. The country achieved a score of 98.3 in the ICT Development Index for 2025, showing exceptional digital progress.

Cybersecurity stands as a cornerstone of the UAE's digital economy. The country achieves perfect scores across all pillars of the International Telecommunication Union's Global Cybersecurity Index, placing it in the top tier and making it a global benchmark.

Safaa El Tayeb El Kogali, the World Bank's Regional Director for Gulf Cooperation Council Countries, put it simply: "Diversification and digital transformation are no longer luxuries but necessities for long-term economic stability and prosperity." She added that strategic investments in non-oil sectors and innovation will be crucial for sustaining growth and economic stability.

The report highlights how Gulf countries have made impressive digital leaps, with robust infrastructure and growing capabilities in artificial intelligence positioning the region for leadership and innovation. But this comes with a condition - environmental and labor challenges need proactive solutions to maintain this trajectory.