The UAE is expected to remain one of the Gulf’s more resilient economies as government spending, diversification efforts and investment flows continue to support non-oil growth, even as geopolitical tensions and higher energy costs weigh on the broader regional outlook, according to Moody’s Global Macro Outlook: Stable global growth will mask considerable variation in trends across economies.
While Moody’s did not provide a standalone forecast for the UAE, the ratings agency said Gulf economies have generally been supported by strong government spending and continued expansion in non-oil sectors despite a more challenging external environment. The report forecasts a gradual recovery in Gulf oil production and exports through 2027, which could help strengthen economic activity across the region.
The agency expects global growth to ease to 2.6 per cent before stabilising through 2027 and 2028, but noted that investment in digital infrastructure, artificial intelligence, energy security and supply chains will continue to underpin economic activity. Those trends align closely with the UAE’s strategy of attracting capital into technology, logistics, renewable energy and advanced industries.
Across the GCC, Moody’s said governments have so far managed to cushion their economies from the impact of conflict-related disruptions through fiscal support and economic diversification programmes. Although higher oil prices and regional tensions have increased uncertainty, the agency said Gulf production and exports are expected to recover gradually as additional pipeline capacity, alternative shipping routes and bilateral arrangements improve export resilience.
Saudi Arabia, the region’s largest economy, is forecast to rebound strongly, with growth accelerating from a projected contraction of 2.8 per cent in 2026 to 5.1 per cent in 2027 and 6 per cent in 2028 as oil production and exports recover.
Moody’s warned that Gulf countries remain more exposed than many other regions to disruptions affecting the Strait of Hormuz and broader Middle East security. However, it said additional export infrastructure and continued government support should help sustain economic activity while the region adapts to a more uncertain geopolitical environment. The report also noted that the Gulf’s long-term development strategies continue to attract foreign investment and support tourism, although regional stability remains an important factor for investor confidence.
Globally, the agency expects advanced economies to grow at around 1.7 per cent through 2028, while emerging-market growth slows before recovering to about 4 per cent. The US economy is projected to return to trend growth of around 2 per cent as consumer spending and artificial intelligence investment moderate. Eurozone growth is expected to improve gradually, reaching 1.4 per cent by 2028, while China’s structural slowdown is likely to continue.
Investment remains central to the global outlook. Moody’s expects spending on AI, digital infrastructure, defence, supply-chain resilience and energy security to support growth, although higher borrowing costs and persistent geopolitical risks could limit momentum. The agency estimates hyperscaler AI capital expenditure will remain near $1 trillion next year, but cautioned that returns on those investments will increasingly come under scrutiny.
Despite ongoing risks from energy markets, trade tensions and geopolitical uncertainty, Moody’s said the global economy has shown remarkable resilience. For Gulf economies such as the UAE, continued diversification, infrastructure investment and strong policy support are likely to remain important buffers against external shocks as growth moderates worldwide.
Source: Khaleej Times