The UAE economy is expected to grow 3.3 per cent this year amid an increase in public spending and higher oil prices, according to Saudi Arabia's Samba Financial Group.
"We expect an increasing shift towards higher capital and social spending," the bank said in its March economic report.
"This includes progress with the raft of development projects approved by the Abu Dhabi Executive Council," the report said
In January, the council announced plans to inject Dh330 billion (US$70.08bn) into the economy over the next five years to build homes, schools, roads and other vital infrastructure projects.
Ambitions to restart $1.1bn worth of previously postponed projects in Dubai, including the world's largest shopping mall and hotels, would also contribute to the UAE's economic growth, the report said.
Fund managers said the improved economic sentiment had triggered a long-awaited catalyst for the local bourses.
"The appetite is there - for both stocks and debt issues,"said Tariq Qaqish, the head of asset management at Al Mal Capital in Dubai. "These projects will revive the economic cycle and build on the infrastructure that the UAE requires to be one of the major hubs for trade and tourism," Mr Qaqish added.
The Abu Dhabi Securities Exchange General Index has risen 14.7 per cent since the start of the year, while the Dubai Financial Market General Index has gained 13.7 per cent in the same period.
Dubai Government's most recent sukuk issuance in January was "massively" oversubscribed, the report said, reflecting "strong market appetite for the UAE".
"Following $15bn in orders, the issue was raised to $1.25bn to include a $500 million 30 years component on market request."
]The Emirates had also benefited from its safe haven status amid regional Arab unrest, the report said. The Arab Spring uprisings had "encouraged capital flows and helped boost confidence (for the UAE)."