S&P Global has affirmed that the UAE economy possesses strong fundamentals enabling it to overcome the repercussions of the war in the Middle East, underpinned by solid foundations including economic diversification, substantial financial reserves, business-friendly government policies, and major strategic projects expected to bolster the growth trajectory in the years ahead.
The agency noted in a comprehensive report that the preliminary understanding between the United States and Iran represents a positive step toward easing regional tensions, with disruptions in the Strait of Hormuz expected to begin subsiding in the second half of 2026, gradually allowing energy flows and trade to return to normal levels, despite some operational challenges persisting during the transitional period.
The report explained that the UAE economy has benefited in recent years from an attractive investment environment, advanced infrastructure, flexible policies, and a low tax system, contributing to strong growth in non-oil sectors averaging approximately 7% over the past five years. It added that the continuation of this approach enhances the country's ability to absorb external shocks compared with many other economies, particularly as the UAE has succeeded in reducing its dependence on oil by diversifying sources of income.
S&P also highlighted the strength of the country's fiscal position, noting that government liquid assets are estimated at approximately 200% of GDP, providing the UAE with a wide safety margin against any economic or financial fluctuations. It pointed out that these reserves, alongside sovereign wealth funds and foreign currency reserves, form a strong line of defence allowing the country to absorb shocks even in severe scenarios.
Regarding the energy sector, the agency projected that the liberalisation of oil production following OPEC+ flexibility and ADNOC investments of approximately $150 billion between 2026 and 2030 would boost economic growth, with plans to raise production capacity to 5 million barrels per day by 2029. It also anticipated that this would support an average economic growth rate of approximately 6% during the period 2027–2029, alongside major expansions in gas projects and industrial infrastructure.
The report noted that strategic projects in ports and pipelines will enhance the country's export capacity and reduce dependence on the Strait of Hormuz, including the East-West pipeline project and expansions at the ports of Fujairah, Khor Fakkan, and Dibba, in addition to increased storage capacity in key Asian markets.
S&P projected that public finances would record strong surpluses averaging 7% of GDP during 2027–2029, supported by higher oil production and low production costs that rank among the lowest globally, with a fiscal breakeven price of approximately $45 per barrel, reinforcing the budget's resilience even during periods of price decline.
The report also commended the speed of government policy responses during the crisis through economic support packages, financial facilities, and regulatory measures that helped stabilise economic activity, alongside the strength of the banking sector, which enjoys high liquidity, stable asset quality, and a non-performing loan ratio of approximately 2.4%, reflecting the robustness of the financial system.
The report concluded by affirming that the UAE possesses an exceptional combination of economic diversification, financial strength, strategic investments, and advanced infrastructure, making it well positioned to achieve strong and sustained growth in the coming years and to consolidate its standing as one of the most resilient and adaptable economies in the region and the world.