DUBAI, United Arab Emirates, 11 March 2026 (AFP) — The International Monetary Fund has said the UAE economy is expected to contract slightly in 2026 because of the Iran war, while stressing that the country has so far shown notable resilience in the face of regional conflict.
The IMF said that resilience has been supported by strong backstops, a swift and effective policy response — including from the government and a support package from institutions linked to the Central Bank of the UAE — as well as by the redirection of oil and other trade flows.
Strong buffers and financial stability
In a statement issued at the end of its annual staff visit to the UAE on Friday, the fund said that “strong government and government-related entity balance sheets helped contain the economic impact, preserve financial stability and bolster confidence”.
It added that it expected “continued fiscal and external surpluses, supported by elevated oil prices, prudent fiscal planning, and sound policies, while low public debt provides ample fiscal space”.
The IMF also said the banking system remained well capitalised and highly liquid, with credit growth continuing to be supported by strong positions built before the conflict. Real estate activity has slowed somewhat after several years of strong growth, which the fund said would require continued monitoring.
Growth seen easing in 2026
Despite uncertainty over how long the conflict will last, how severe it may become, and the impact of the intermittent closure of the Strait of Hormuz on economic activity, the IMF said the economy was expected to recover in the second half of the year if relations between the United States and Iran gradually normalise.
It said exports would recover and OPEC+ quotas would be lifted under that scenario.
Following the strong expansion seen in 2025, gross domestic product is expected to fall slightly in 2026, driven by slower non-oil activity as rising uncertainty weighs on tourism, transport, trade and real estate.
Oil and gas growth is expected to rebound in the second half of the year as rising oil exports and higher output after the UAE’s exit from OPEC offset the effects of conflict-related disruption, the fund said.
Exit from OPEC-era arrangements
On 1 May 2026, a 59-year membership came to a formal end when the UAE’s decision to withdraw from the Organisation of the Petroleum Exporting Countries (OPEC), the OPEC+ alliance and the Organisation of Arab Petroleum Exporting Countries (OAPEC) took effect.
The UAE produces about 3.5 million barrels of oil per day and aims to raise output to 5 million barrels per day.
Outlook for 2027 and inflation
According to the statement, overall growth is expected to rebound strongly in 2027 as oil and gas output increases and non-oil activity recovers, supported by a return to normal levels of tourism and trade.
Inflation is expected to edge higher in 2026, reflecting the impact of rising global energy and food prices, before gradually easing over the medium term.
Last month, Standard & Poor’s forecast a 2.7% contraction in the UAE’s real GDP in 2026, following strong growth of 6.2% in 2025 due to trade disruptions and continuing security risks.