UAE Economic Momentum Remains Strong Amid Global Challenges, Says HSBC Economist

Simon Williams, HSBC's chief economist for Central and Eastern Europe, the Middle East, and Africa, expressed optimism about the economic outlook for the Gulf Cooperation Council (GCC) region, especially the UAE. Despite global challenges, he believes the region's prospects remain robust. Speaking at the third MENA Capital Markets Summit, Williams highlighted that the UAE entered 2025 with strong economic momentum due to rising consumption and investment.

Williams emphasised that Gulf state budgets are stable, and structural reforms over the past five years have bolstered long-term growth potential. These measures have helped the region withstand external shocks effectively. He projected that the UAE's non-oil GDP would grow between 3.5 and 4 percent in both 2025 and 2026, which he described as impressive by global standards.

Addressing global trade tensions, Williams remarked that trade wars and tariffs disrupt global growth without benefiting any party. He suggested that these long-term shifts might lead companies to reconsider their foreign direct investment (FDI) strategies and capital allocation. In terms of FDI into the UAE, he noted that inflows remained robust over the past three years, representing 4 to 5 percent of GDP—a high level compared to global norms.

The Capital Markets Summit served as a crucial platform for discussions among policymakers, market participants, financial institutions, and corporates. The event focused on current dynamics, emerging opportunities, and vulnerabilities within capital markets. During this summit, HSBC UAE released a report titled "Strategy to Scale: Dubai’s Blueprint for Capital Market Growth."

This report highlights how capital markets play a pivotal role in Dubai's ambition to become one of the world's top four financial centres. Produced in collaboration with Dubai Financial Market (DFM), it serves as a guide for new investors. It outlines how accelerated internationalisation of equities and bonds alongside significant structural reforms is bringing Dubai closer to its 2033 economic vision.

The report delves into Dubai's capital markets' expansion and global reach. It explores potential improvements in deal flows, secondary market liquidity, and tech-driven financial infrastructure enhancements. Between 2016 and 2024, DFM achieved annualised returns of 4.9 percent in US dollars, surpassing the broader MSCI Emerging Markets Index's 2.8 percent return.

Dubai's Growing Financial Sector

By late 2024, foreign investors were responsible for half of DFM’s total trading activity and accounted for 85 percent of registered investors. This underscores Dubai’s growing appeal on a global scale. Furthermore, the number of wealth and asset managers operating in Dubai International Financial Centre (DIFC) increased by 16 percent year-on-year to reach 410 in 2024; this includes 75 hedge fund managers.

The insights shared by Simon Williams highlight both challenges and opportunities facing the GCC region's economy. With strategic planning and continued reforms, the UAE is well-positioned to maintain its economic momentum despite external pressures.

With inputs from WAM