S&P: UAE GDP growth will remain strong in 2025-2027

It will be supported by buoyant non-hydrocarbon activity, business-friendly regulations and low corporate tax regime

Banks in the United Arab Emirates have benefited from a strong domestic economy, leading to improved asset quality metrics and lower credit losses, according to an S&P Global Rating report which anticipated that this improvement will persist in 2025.

The American credit rating agency anticipated a steady economic growth to continue in the UAE: «As hydrocarbon production picks up, we anticipate that real GDP growth will remain strong in 2025-2027, further supported by buoyant non-hydrocarbon activity. Business-friendly regulations and a low corporate tax regime, a simplified visa regime, and the success of long-term residency visas will continue to fuel new businesses and increase the population in the country.»

The agency expected the banking sector’s robust earnings to dip slightly in 2025 after strong performance in the past two years.

«The lending book will continue expanding as monetary policy eases. Although the UAE could be affected by regional geopolitical tensions and oil price volatility, we believe risks will remain in check. We expect UAE banks to maintain stable and strong capital buffers, robust funding profiles, and continued government support, which will underpin their resilience.»

The agency said the lending growth in the UAE to remain strong and that lower interest rates and supportive economic environment will boost lending growth: «We expect strong lending growth to persist in 2025, driven by the ongoing monetary policy easing and supportive economic environment. Banks have seen a notable increase in deposits over the past three years, which will support their strong growth momentum.»

The agency added that UAE banks’ profitability improved with monetary tightening, as higher interest rates helped expand margins: «We now expect profitability to follow amid declining interest rates. We expect the cost of risk to remain low, and therefore UAE banks’ profitability should remain high, albeit lower than the peak of 2023.»