UAE Non-Oil Economy Faces 2026 Contraction Before Recovery
The non-oil economy of the United Arab Emirates is projected to shrink by 3.7% in real terms in 2026 as conflict between the US and Iran creates persistent security and logistical challenges across the region. However, economic activity is expected to rebound with growth of 6.1% in 2027 and 4.3% in 2028, remaining below the historical average recorded from 2022 to 2025.
Structural advantages, including government financial support and a favorable business environment, continue to underpin the resilience of the UAE. Despite these strengths, extended geopolitical instability threatens the country's position as a trade, tourism, and financial center. Shipping disruptions through the Strait of Hormuz and potential risks to attracting foreign capital and international workers present ongoing vulnerabilities for non-oil expansion.
Credit ratings for the UAE and Abu Dhabi remain stable at AA- and AA respectively, bolstered by robust sovereign balance sheets and low taxation. Conversely, Ras Al Khaimah holds an A+ rating with a negative outlook, as its fiscal trajectory relies heavily on the recovery of international visitor arrivals.
Key points
- The UAE non-oil economy is expected to contract by 3.7% in 2026 before expanding by 6.1% in 2027 and 4.3% in 2028.
- Disruption along the Strait of Hormuz and heightened security risks threaten the country's logistics hub and tourism appeal.
- Heavy reliance on foreign labor remains a primary structural vulnerability for the UAE non-oil growth model.
- UAE and Abu Dhabi credit ratings remain stable at AA- and AA, while Ras Al Khaimah holds an A+ rating with a negative outlook.
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How we writeDisclaimerQuestions and answers
How much is the UAE non-oil economy expected to contract in 2026?
The UAE non-oil economy is projected to contract by 3.7% in real terms in 2026 due to regional conflict before returning to growth of 6.1% in 2027.
What are the primary risks facing the UAE economy during the conflict?
Key risks include disruptions to logistics through the Strait of Hormuz, reduced attractiveness for tourism and foreign businesses, and potential challenges in retaining foreign workers.
What are the current credit ratings for the UAE, Abu Dhabi, and Ras Al Khaimah?
The credit ratings are AA- with a stable outlook for the UAE, AA with a stable outlook for Abu Dhabi, and A+ with a negative outlook for Ras Al Khaimah.