The UAE economy is set to rebound in the second half of this year despite the regional war, amid an exports recovery following its exit from Opec, the International Monetary Fund said on Friday.
The country has “demonstrated significant resilience” amid the conflict, the IMF's mission chief to the UAE, Said Bakhache, said following a visit to Dubai this month.
“Sound fundamentals, ample policy buffers, advanced preparedness and a swift policy response have contained the overall impact of the shock,” he said.
Timely and well-targeted support measures also helped “preserve financial stability, safeguard essential supply chains, support affected sectors and households, and sustain market confidence”, he added.
Uncertainty remains high about the duration and intensity of the continuing conflict, and the on-and-off closure of the Strait of Hormuz is weighing on activity.
But “assuming a gradual normalisation between the US and Iran, the economy is expected to rebound in the second half of the year as exports recover and Opec+ quotas no longer bind”, the IMF said.
The UAE left the oil producers group on May 1, ending more than five decades of membership. The Emirates, the world's seventh-largest oil producer, said its decision was due to a growing mismatch between its rising production capacity and the quotas it was permitted to pump under the group's framework.
As part of the Opec+ supergroup, the UAE had been producing close to 30 per cent below its capacity of 4.85 million barrels per day.
UAE oil exports exceeded prewar levels in June, running 27 per cent above their 12-month average, data from energy intelligence company Kpler found.
The Emirates shipped 3.94 million bpd of crude and condensate in June, the highest monthly total in the past year, and a sharp reversal from March, when the blockade of the Strait of Hormuz cut exports to a record low of 2.13 million bpd.
War impact
The Iran war, which began on February 28, has weighed heavily on growth, in the Gulf and globally.
The World Bank in June said the global economy is set to expand at its lowest rate this year since the Covid-19 pandemic, with nearly zero growth forecast for Gulf nations.
The UAE's economy is projected to expand by 2.4 per cent this year, it said, down 2.6 per cent from its January estimate.
The IMF said on Friday that non-oil sector growth in the UAE has seen a slowdown since heightened uncertainty weighed on tourism, transportation, trade and real estate.
However, hydrocarbon growth is expected to pick up in the second half of the year, as recovering oil exports and the ramp-up in production following the UAE's exit from Opec “more than offset conflict-related disruptions”.
Looking to 2027, overall economic growth is projected to “rebound strongly, as hydrocarbon production scales up and non-hydrocarbon activity recovers, supported by normalising tourism and trade flows”, the fund added.
Meanwhile, inflation is also expected to edge up in 2026, due to higher global energy and food prices, before gradually easing over the medium term.
“The general government fiscal balance is expected to remain in surplus in 2026, supported by favourable oil revenues and conservative budgeting practices,” Mr Bakhache said.
“While the surplus is projected to narrow, high oil prices, front-loaded dividends, and expenditure-efficiency measures help offset revenue pressures from weaker non-oil activity, even as targeted support to affected sectors and households and planned infrastructure projects continue.”
He added that strong profitability and improved liquidity have left public and private sectors “well positioned” to weather the impact of the conflict.
“Advancing diversification and continued structural reforms remain key to sustaining growth,” Mr Bakhache said.
Deeper trade integration, supported by the UAE's Cepa deals and sustained investment in technology and human capital would “reinforce non-oil growth and support resilience to external shocks”, he added.
