The National Bank of Kuwait (NBK) projects that the UAE’s fiscal surplus will decrease due to expectedly declining oil prices. Due to increased oil production in 2025–2026, GDP growth is predicted to average 4.2%, indicating that the nation’s overall economy is still doing well despite growing external risks.
The bank stated that although increased oil production will continue to boost hydrocarbon revenues, the nation’s overall fiscal surplus is expected to decline from an estimated 5.5% of GDP in 2024 to 4% in the next two years.
In the current environment, the outlook’s downside risks—which could depress investor sentiment—predominate and range from declining oil prices to a decline in international trade brought on by trade tariffs.
“Although downside risks to the UAE’s externally-exposed economy have increased, our base case outlook for 2025-26 remains relatively upbeat with GDP growth averaging 4.2% in 2025-26 led by higher oil production, while non-oil growth will slow but is underpinned by continued reform and investment initiatives, strong international competitiveness metrics and healthy if narrowing macroeconomic balances,” NBK said in a report.
The UAE government is increasing its funding for several projects between 2025 and 2026, which is why the fiscal surplus is expected to decline. Throughout the two years, government spending may increase by 3–6%, with larger budgets allocated to social benefits, infrastructure, and diversification initiatives.
“The attractiveness of the UAE for tourists, and its economy to labour, capital and business, underpinned by its investment and diversification agenda, provide underlying resilience,” NBK said.
The country’s current account surplus may drop to 23.3% of GDP by 2026 due to lower oil prices, slower external demand, and the effects of US tariffs on iron, steel, and aluminium.
In addition, the non-oil sector’s growth may slow, and rising supply and interest rates may cause property prices to decline. The bank said interest rate reductions would boost demand for real estate, but increased supply and more stringent laws might have an adverse effect on sales and price increases in 2025–2026.