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A special report on the UAE non-oil growth model seen by EnterpriseAM showed that Fitch Ratings expects the sector to contract 3.7 percent in real terms this year before expanding 6.1 percent in 2027 and 4.3 percent in 2028. The agency noted that the non-oil economy would still end 2027 2.2 percent larger than in 2025 although the projected growth rates would fall well below the 7.4 percent average achieved between 2022 and 2025. Fitch Ratings added that the forecast incorporates a 1 percent population shrinkage in 2026 followed by growth of 2 percent in 2027 and 3 percent in 2028 compared with an average expansion of 4.8 percent over the previous four years.
Fitch Ratings attributed the anticipated contraction to the impact of the US-Iran war which has disrupted shipping routes and heightened security concerns that reduce the attractiveness of the UAE to foreign companies workers and visitors. The report highlighted that ports inside the Strait of Hormuz handle about 80 percent of UAE trade with Jebel Ali alone accounting for half of that volume. According to the agency the first half of the year saw non-oil GDP grow 1.8 percent based on preliminary Federal Competitiveness and Statistics Centre figures although a 1.1 percent contraction in the second quarter marked the first full quarter affected by the conflict.
The Fitch Ratings assessment found that financial and professional services which represent roughly one fifth of non-oil GDP would be among the sectors most exposed if businesses and staff choose to locate elsewhere amid the uncertainty. Real estate which constitutes 8 percent of the non-oil economy also faces downward pressure from the projected population decline at a time when fresh supply is coming to market the agency said. Logistics stands out as particularly vulnerable given the reliance on routes now complicated by the regional conflict.
Fitch Ratings described the UAE non-oil growth model as having rested on the country’s position as a hub connecting Asia and Europe a light-touch operating environment and policies that successfully attract international business talent and tourists. The report indicated that structural strengths should allow the economy to weather the current conflict without further escalation although prolonged instability would threaten the logistical edge and overall hub status. EnterpriseAM reported that the agency expects the government and related entities to step up capital spending on infrastructure and strategic projects in 2026 and 2027 to support activity and rebuild confidence.
According to Fitch Ratings overall real GDP is projected to grow by 0.9 percent in 2026 before accelerating sharply to 8.5 percent in 2027 and then moderating to 3.8 percent in 2028 as hydrocarbon production and exports recover. The agency maintained the UAE sovereign rating at AA- with a stable outlook supported by exceptionally strong fiscal and external positions. Fitch Ratings cautioned that an adverse scenario with intensified pressures from the conflict would amplify the contraction in non-oil output and related sectors.
