The United Arab Emirates (UAE) used to rely heavily on oil to drive growth, but over the last decade, it has shifted its economic focus. In 2025, the International Monetary Fund (IMF) expects the UAE’s GDP to grow by 4%, rising to 5% in 2026, outpacing both Saudi Arabia and Qatar. Most of this growth now comes from non-oil sectors, which make up the majority of the economy.
The UAE’s Central Bank expects non-oil GDP to grow by about 5% this year, driven by tourism, trade, logistics and manufacturing. Non-oil exports and re-exports reached over AED 2 trillion (dirhams) in the first nine months of 2024, up nearly 15% from the year before, showing strong demand. This growth is supported by heavy infrastructure spending and a wide network of over 100 international trade deals.
The UAE’s growth is happening alongside overall economic stability. Inflation is low at around 2%, and the dirham’s peg to the US dollar continues to give investors’ confidence. At the business level, KPMG’s 2024 CEO Outlook shows that over 70% of UAE-based executives expect growth, with most predicting higher revenues over the next three years. Unlike in the past, when oil prices drove economic swings, this region now offers a more stable and diverse environment.
Economic momentum: comparing past performance to present strength
The economy is growing faster than in previous years and ahead of other GCC (Gulf Co-operation Council) countries, and no longer tied to oil prices. Sectors like logistics, manufacturing and digital services are now the economic drivers.
The Emirates’ push to diversify has been backed by major policy changes. A 9% federal corporate tax was introduced in mid-2023 to align with global financial standards. So far, this has not hurt investor confidence. Foreign Direct Investment (FDI) remains strong and new company registrations, especially in free zones like DMCC (Dubai Multi Commodities Centre) and DIFC (Dubai International Financial Centre), are still rising. Couple these points with a steady 2% inflation and international firms feel a more solid degree of financial predictability.
These factors make the UAE a reliable option for Western companies looking at long-term plans in the Gulf. Where past volatility discouraged investment, it now offers stability, something not easily found elsewhere in the region.
Strategic diplomacy: how the UAE balances global alliances
The UAE’s foreign policy is built on flexibility rather than alignment. While maintaining longstanding defence and intelligence ties with the US, the Emirates also engage closely with China, India and Russia, often taking a transactional, interest-based approach to international co-operation. This balancing act has allowed the country to expand its diplomatic influence without becoming overly reliant on any single power bloc.
As a founding member of OPEC, the UAE still backs co-ordinated oil production, but it is also pushing ahead with decarbonisation. Projects like Masdar and the national hydrogen roadmap show that it wants to lead in clean energy, not just be part of its development.
Now taking a more active role in regional geopolitics, it has been involved in conflicts in Sudan, Yemen and Libya, and often acts to protect its own security and economic interests. A recent UN report linked the UAE to drone strikes and arms shipments in Sudan, showing a greater willingness to use hard power when it is needed.
At the same time, the Abraham Accords normalised ties with Israel, bringing in new investment despite criticism from some Arab states. The UAE has also joined the expanded BRICS group and signed trade deals with ASEAN and African countries. Such moves show it is broadening its diplomatic and economic links while maintaining strong ties with the West, which for global companies, suggests this region will stay open and stable even as alliances shift.
Western partnerships: who is succeeding in the UAE?
For Western firms, the UAE has become a reliable base, not just for Gulf operations, but for access to Asia, Africa and Europe. Many multinationals have moved regional headquarters to Dubai or Abu Dhabi, drawn by its conducive business environment. According to analysts, companies like Amazon, HSBC, Nestle and Boston Consulting Group all run major operations from the Emirates.
In tech, Microsoft has expanded through its partnership with G42, an Emirati AI company backed by Mubadala. Their work with OpenAI includes new data centres and AI infrastructure in Abu Dhabi, putting the UAE on the map for advanced computing. Financial firms like J.P. Morgan and Barclays have grown their presence in the DIFC, using the UAE’s legal and tax frameworks to reach Middle Eastern clients.
Professional services are also represented. PwC, Deloitte, EY and KPMG base their regional work out of the Emirates. Western law firms continue to expand in Abu Dhabi Global Market (ADGM), citing a legal system they trust. This level of engagement shows more than just market interest; it reflects business confidence in its stability and governance. For firms looking at regional hubs, the UAE is now a proven choice.
Market opportunities: what the UAE offers Western firms
Western companies looking to grow in the Gulf see the UAE as a strong option for long-term investment. Its logistics network is held in place by major assets like Jebel Ali Port – one of the world’s busiest – and Emirates Airline, which connects easily to Asia, Africa and Europe.
Manufacturing is also expanding under the ‘Make it in the Emirates’ program, which pushes for local production under investor-friendly rules. The Ministry of Industry and Advanced Technology reports growing interest from sectors like precision engineering and pharmaceuticals.
Risk landscape: stability, perception and reputational concerns
As one of the most stable environments in the Middle East, crime is low, institutions function reliably, and there is no real threat to political continuity. This stability is a clear benefit for foreign investors, but it comes with trade-offs Western firms need to consider.
The government is authoritarian. Free speech, freedom of assembly, and press freedoms are tightly controlled. Human Rights Watch notes that the Federal Penal Code criminalises peaceful dissent, including criticism posted on social media. These restrictions can create reputational challenges, especially for companies with Environmental, Social and Governance (ESG) commitments.
The UAE’s location also brings geopolitical exposure. While the country has not faced direct attacks recently, it remains within range of drone and missile threats. Governments have warned that conflicts involving Iran, Yemen, Gaza and Sudan could pose risks for foreign operators in the region. Still, the UAE’s global profile is rising. In 2025, it ranked in the top 10 of the Soft Power Index, reflecting strong diplomatic ties and influence.
Conclusion
The UAE has become a reliable base for international business in a region known for volatility. Its move away from oil dependency is now well under way, with promising non-oil sector growth and a stable currency. These factors have helped to attract consistent foreign investment, even after the introduction of corporate tax.
On the diplomatic side, the UAE’s pragmatic and stable governance gives multinational firms the predictability they need. It maintains independent foreign policy while keeping open ties with major global powers, making it a neutral platform for doing business across the Gulf and beyond.
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