UAE Real GDP Surges 3.9% to $124 Billion in Q1 2025 as Non-Oil Economy Hits Historic 77.3% Share

The UAE’s economic diversification strategy has reached a historic milestone, with real Gross Domestic Product growing by 3.9% to total AED 455 billion ($123.89 billion) in the first quarter of 2025, compared to the same period in 2024. More significantly, non-oil activities have achieved an unprecedented 77.3% contribution to real GDP—the highest in the country’s history—marking a transformative shift in the UAE’s economic structure.

Build the future you deserve. Get started with our top-tier Online courses: ACCA, HESI A2, ATI TEAS 7, HESI EXIT, NCLEX-RN, NCLEX-PN, and Financial Literacy. Let Serrari Ed guide your path to success. Enroll today.

Non-Oil Sector Drives Economic Expansion

The stellar performance of non-oil GDP, which recorded 5.3% growth, reaching AED 352 billion, underscores the success of the UAE’s decades-long economic diversification efforts. This growth trajectory significantly outpaced oil-related activities, which contributed 22.7% to the overall economy during Q1 2025, demonstrating the country’s reduced dependence on hydrocarbon revenues.

The diversification achievement aligns perfectly with the ambitious “We the UAE 2031” vision, which aims to double the country’s GDP from AED 1.49 trillion to AED 3 trillion by the next decade. This national strategic framework emphasizes building a knowledge-based, innovation-driven economy that positions the UAE as a global leader in emerging sectors.

Manufacturing Emerges as Growth Champion

Manufacturing activities topped all economic sectors with an impressive 7.7% growth rate in Q1 2025, reflecting the UAE’s commitment to industrial development and value-added production. This sector’s performance aligns with the National Investment Strategy 2031, which targets doubling foreign direct investment to $354 billion by 2031, with particular emphasis on advanced manufacturing capabilities.

The finance and insurance sector matched manufacturing’s momentum with 7.0% growth, followed by construction at 7.0%, real estate activities at 6.6%, and trade activities at 3.0%. These growth rates demonstrate broad-based economic expansion across multiple sectors, indicating the sustainability of the UAE’s diversification strategy.

Sectoral Contributions Shape Economic Landscape

In terms of actual contribution to non-oil GDP during Q1 2025, the trade sector maintained its dominant position, contributing 15.6% of the total. The finance and insurance sector ranked second with a 14.6% contribution, followed by manufacturing industries at 13.4%. The construction sector contributed 12.0%, while real estate activities accounted for 7.4% of non-oil GDP.

These sectoral contributions reflect the UAE’s evolution into a sophisticated, services-oriented economy while maintaining strong manufacturing and trade capabilities. The balanced distribution across sectors provides economic resilience and reduces vulnerability to single-sector downturns.

Trade Sector Maintains Leadership Role

The trade sector’s continued leadership position reflects the UAE’s strategic location and its role as a global logistics hub. Recent government initiatives aim to further strengthen this position, with the UAE Logistics Integration Council targeting growth from AED 136.7 billion in 2024 to over AED 200 billion within seven years, representing a 46% increase that would further boost the trade sector’s contribution.

Government Leadership Emphasizes Strategic Achievement

Abdulla bin Touq Al Marri, Minister of Economy and Tourism, characterized the Q1 results as reaffirming “the strength and resilience of the UAE economy and its capacity to sustain exceptional growth.” He emphasized that the preliminary estimates highlight the success of the nation’s comprehensive development model and reflect international confidence in the country’s business and investment environment.

“The contribution of non-oil activities to real GDP reached a record 77.3% in the first quarter—the highest in the country’s history,” Al Marri noted. “This reflects the strong momentum of the UAE’s economic diversification drive and underscores the effectiveness of national policies and strategies aimed at building an economic model based on knowledge and innovation.”

Strategic Vision Alignment

The Minister directly linked these achievements to the “We the UAE 2031” vision, which seeks to raise the country’s GDP to AED 3 trillion by the next decade. This ambitious target represents a doubling of the current economic size and positions the UAE among the world’s most dynamic economies.

The vision encompasses four strategic pillars: Forward Society, Forward Economy, Forward Diplomacy, and Forward Ecosystem, each designed to enhance the UAE’s global competitiveness and sustainable development objectives.

Federal Statistics Leadership Highlights Model Efficiency

Hanan Mansoor Ahli, Director of the Federal Competitiveness and Statistics Centre, emphasized that the UAE’s GDP growth demonstrates the efficiency of the country’s economic model and the government’s success in implementing leadership directives for sustainable sector development. She noted that non-oil GDP growth exceeding 5% reflects the UAE’s commitment to establishing an advanced, diversified economic model driven by technology and innovation.

“This model ensures an enabling environment for businesses and creative minds, transforming their ideas into successful companies and projects that contribute to the UAE’s evolving economic landscape,” Ahli explained, highlighting the entrepreneurial ecosystem that supports the diversification strategy.

Regional Economic Context and Competitiveness

The UAE’s economic performance occurs within a broader regional context where Gulf Cooperation Council countries are pursuing similar diversification strategies. However, the UAE’s achievement of 77.3% non-oil contribution distinguishes it significantly from regional peers and demonstrates the maturity of its diversification efforts.

Recent economic projections suggest continued strength, with the UAE’s GDP forecasted to grow by 4.7% in 2025, while Dubai specifically is expected to see 3.3% growth. These projections, supported by population growth and continued investor confidence, reinforce the UAE’s position as a competitive global hub.

International Investment Attractiveness

The UAE’s economic diversification success has enhanced its attractiveness to international investors. The National Investment Strategy 2031 targets tripling the cumulative FDI balance to $599 billion, building on the country’s recent achievement as the second globally for new FDI projects, with 1,323 new ventures representing a 33% increase from 2022.

Manufacturing Sector Deep Dive

The manufacturing sector’s 7.7% growth rate reflects the UAE’s strategic focus on industrial development and value-added production capabilities. This performance aligns with the Dubai Industrial Strategy 2030, which aims to elevate Dubai into a global platform for knowledge-based, sustainable, and innovation-focused businesses.

Recent developments in the manufacturing space include significant infrastructure investments and technology adoption. The sector benefits from the UAE’s strategic location, advanced logistics infrastructure, and progressive regulatory environment that encourages innovation and entrepreneurship.

Advanced Manufacturing Initiatives

The UAE’s focus on advanced manufacturing encompasses aerospace, automotive, pharmaceuticals, and technology sectors. Government-led investments, such as Strata in the aerospace industry under Mubadala, demonstrate successful public sector initiatives, while entrepreneurial ventures like Zarooq Motors in the automotive industry illustrate private sector innovation.

Fuel your success with knowledge that matters. Enroll in our Online programs: ACCA, HESI A2, ATI TEAS 7, HESI EXIT, NCLEX-RN, NCLEX-PN, and Financial Literacy. Join Serrari Ed now and take control of your future.

Finance and Insurance Sector Performance

The finance and insurance sector’s 7.0% growth and 14.6% contribution to non-oil GDP underscore the UAE’s position as a regional financial center. The sector benefits from the country’s strategic location, regulatory sophistication, and connectivity to global financial markets.

Recent regulatory developments, including the introduction of a 15% domestic minimum tax on multinational corporations in January 2025 and the 9% corporate tax introduced in mid-2023, are diversifying government revenue streams while maintaining the UAE’s competitiveness as a business destination.

Financial Services Innovation

The UAE’s financial sector continues to embrace innovation, with initiatives in digital banking, fintech, and Islamic finance contributing to its growth trajectory. The country’s progressive approach to financial regulation and its embrace of emerging technologies position it favorably for continued expansion in financial services.

Construction Sector Dynamics

The construction sector’s 7.0% growth reflects ongoing infrastructure development and urban expansion across the UAE. Major projects contributing to this growth include transportation infrastructure, smart city initiatives, and sustainable development projects aligned with the country’s environmental commitments.

The sector benefits from substantial government infrastructure investments, with the government allocating $23 billion for infrastructure investments in 2022. Major projects include the $2.7 billion Sheikh Zayed double-deck road initiative and the $1.37 billion Shindagha Bridge project in Dubai.

Future Infrastructure Pipeline

Looking ahead, the construction sector is positioned to benefit from continued infrastructure development under various emirate-level master plans and the national 2040 vision. These projects encompass transportation, utilities, and smart city infrastructure that will support continued economic growth.

Real Estate Market Resilience

The real estate sector’s 6.6% growth reflects continued investor confidence and market resilience. Dubai’s residential market performance showed over 42,000 sales transactions in Q1 2025, with total sales value reaching AED 114.4 billion, representing a 29.6% year-on-year increase.

The luxury and ultra-luxury segments continue to perform strongly, with nearly 590 transactions exceeding AED 20 million recorded in Q1 2025. This performance is supported by favorable residency schemes, competitive tax environment, and Dubai’s positioning as a globally connected lifestyle destination.

Population Growth Impact

Dubai’s population growth, which could approach 4 million by the end of 2025 if current trends continue, provides fundamental support for real estate demand. This demographic expansion, combined with continued expatriate inflows, creates sustained demand across both sales and rental markets.

Logistics Sector Transformation

The UAE’s logistics sector is undergoing significant transformation, with ambitious targets for growth from AED 136.7 billion in 2024 to over AED 200 billion within seven years. The recently established UAE Logistics Integration Council aims to coordinate federal and local entities to enhance sector efficiency and reinforce the UAE’s position as a global trade hub.

The UAE freight and logistics market is estimated at $21.63 billion in 2025 and expected to reach $30.19 billion by 2030, growing at a CAGR of 6.90%. This growth is driven by substantial infrastructure investments, technological advancement, and the country’s strategic location.

Digital and Green Transformation

The logistics sector is embracing digital and green transformation initiatives, including smart solutions expansion, carbon emissions reduction, and sustainable development practices. These initiatives align with the UAE’s broader environmental commitments and its goal of achieving net-zero emissions by 2050.

Technology and Innovation Infrastructure

The UAE’s commitment to technology and innovation is evident in its substantial investments in emerging sectors. The space sector has achieved significant milestones, with total investments surpassing AED 40 billion ($10.9 billion), positioning the UAE as a regional and global leader in space exploration.

The country has become the first to launch a mission to the asteroid belt and participate in NASA’s Artemis programme, demonstrating its commitment to cutting-edge scientific exploration. The Space Economic Zones Programme now supports over 200 private companies, illustrating the sector’s contribution to economic diversification.

Artificial Intelligence Strategy

The UAE’s AI strategy represents a fundamental transformation in government services and economic operations. By 2031, the country aims to achieve 100% reliance on AI for government services and data analysis, characterizing the post-mobile government phase where all future services will rely on artificial intelligence.

International Trade Performance

The UAE’s trade performance continues to strengthen its position as a global commerce hub. Non-oil trade surpassed AED 1.3 trillion in 2024, equivalent to 134% of GDP, while non-oil exports exceeded $120 billion in 2023, marking a 16.7% increase from the previous year.

The country has concluded more than 20 Comprehensive Economic Partnership Agreements (CEPAs), including recent agreements with Ukraine, Malaysia, Kenya, and the Eurasian Economic Union, expanding market access and trade opportunities.

E-commerce and Digital Trade

The rapid growth of e-commerce is transforming the UAE’s trade landscape. The country ranks as the 27th largest e-commerce market globally, with the sector experiencing 3% year-on-year growth in 2023 and projected to grow by over 9% by the end of 2024. The Dubai Chamber of Commerce and Industry predicts the e-commerce sector will reach $8 billion by 2025.

Environmental and Sustainability Initiatives

The UAE’s economic growth strategy incorporates significant environmental and sustainability considerations. The country’s commitment to achieving net-zero emissions by 2050 is driving investments in renewable energy, green technology, and sustainable development practices across all economic sectors.

Major renewable energy projects, including the Mohammed bin Rashid Al Maktoum Solar Park—the world’s largest single-site solar energy project with a total investment of $13.61 billion—exemplify the UAE’s leadership in clean energy and sustainable development.

Circular Economy Progress

The UAE’s circular economy agenda has achieved notable successes in sustainable agriculture and bio-diesel production. These initiatives contribute to resource efficiency while supporting economic growth objectives, demonstrating that environmental sustainability and economic development can be mutually reinforcing.

Labor Market and Human Capital Development

The UAE’s economic transformation is supported by strategic human capital development initiatives. The country aims to rank among the top 10 globally in attracting international talent while developing domestic capabilities in emerging sectors such as artificial intelligence, renewable energy, and advanced manufacturing.

Educational initiatives, including partnerships with leading global universities, are building specialized talent pipelines in key growth sectors. These efforts ensure that economic expansion is supported by the necessary human capital and skills development.

Emiratization and Workforce Development

Emiratization initiatives continue to enhance the participation of UAE nationals in the private sector, particularly in emerging industries. These programs combine with international talent attraction to create a diverse, skilled workforce capable of supporting continued economic growth and innovation.

Challenges and Risk Mitigation

Despite strong performance, the UAE economy faces various challenges including global economic uncertainty, geopolitical tensions, and commodity price volatility. However, the country’s diversified economic structure and proactive policy responses provide resilience against external shocks.

The government’s fiscal position remains strong, with continued investment in infrastructure and diversification initiatives. The UAE maintains high credit ratings (AA from major agencies) supported by diversified revenue streams and substantial sovereign assets.

Future Economic Outlook

Looking forward, the UAE’s economic prospects remain positive, supported by continued diversification efforts, strategic investments, and favorable demographic trends. The achievement of 77.3% non-oil contribution to GDP provides a solid foundation for sustained growth and reduced vulnerability to oil price fluctuations.

Conclusion: A Model for Regional Economic Transformation

The UAE’s Q1 2025 economic performance represents more than statistical achievement—it demonstrates the successful implementation of a comprehensive economic transformation strategy spanning multiple decades. The historic 77.3% non-oil contribution to GDP validates the effectiveness of diversification policies and positions the UAE as a model for other resource-dependent economies.

The broad-based growth across manufacturing, finance, construction, real estate, and trade sectors indicates the maturity and sustainability of the UAE’s economic diversification. With the “We the UAE 2031” vision providing strategic direction and continued investment in emerging sectors, the country is well-positioned to achieve its ambitious goal of doubling GDP to AED 3 trillion by 2031.

As global economic dynamics continue to evolve, the UAE’s achievement in building a knowledge-based, innovation-driven economy provides both domestic resilience and international competitiveness. The success of this economic model offers valuable insights for other nations pursuing similar transformation objectives while reinforcing the UAE’s position as a global economic hub.

The UAE’s economic diversification story continues to unfold as additional quarterly data becomes available and strategic initiatives under the “We the UAE 2031” vision advance toward their 2031 targets.

Ready to take your career to the next level? Join our Online courses: ACCA, HESI A2, ATI TEAS 7 , HESI EXIT  , NCLEX – RN and NCLEX – PN, Financial Literacy!🌟 Dive into a world of opportunities and empower yourself for success. Explore more at Serrari Ed and start your exciting journey today! ✨

Track GDP, Inflation and Central Bank rates for top African markets with Serrari’s comparator tool.

See today’s Treasury bonds and Money market funds movement across financial service providers in Kenya, using Serrari’s comparator tools.

Photo source: Google

By: Montel Kamau

Serrari Financial Analyst

9th September, 2025