The United Arab Emirates (UAE) has maintained its position as the Gulf Cooperation Council’s (GCC) strongest economic performer, even navigating through economic uncertainties with resilience. According to Michael Strobaek, Global Chief Investment Officer at Bank Lombard Odier, the UAE’s economy achieved a “soft landing” and is poised for growth, supported by its flexibility in oil production and robust non-oil sectors.
Economic Growth in the UAE: Steady and Resilient
Strobaek expressed confidence in the UAE and wider GCC’s potential to accelerate economic growth by 2025. As oil production gradually expands and monetary policies become more favorable, the UAE’s versatile economy is expected to thrive. Strobaek highlighted that while oil remains significant, the UAE has diversified beyond hydrocarbons, contributing to a vibrant economy with stable growth indicators.
Ties to the US Dollar: Stability Through Policy Alignment
Due to the UAE’s currency peg to the US dollar, GCC monetary policy is closely aligned with that of the Federal Reserve. Strobaek anticipates a 150 basis point rate cut by regional central banks, mirroring the Fed’s expected actions within the coming year. This monetary policy shift is expected to stabilize the credit cycle, providing a reliable environment for investment and growth.
“Despite efforts to deepen economic ties with emerging markets like China, the UAE and other GCC nations have kept significant US dollar reserves to uphold the currency peg,” Strobaek noted. While reserves have declined recently, they still surpass those of many other regions, ensuring stability.
Dubai’s Real Estate Market: Strong Momentum and Bright Prospects
Dubai’s real estate sector has witnessed strong growth, driven by an economic rebound and favorable monetary conditions. Strobaek foresees this momentum carrying forward, as rate cuts continue to support demand despite recent price hikes.
“Inflation in the UAE is expected to remain steady in 2025,” he said, “especially given the stability in global goods prices, though housing inflation may persist.” The UAE’s economic structure is influenced by global trade dynamics, particularly its ties to China, adding another layer to real estate demand and pricing trends.
The Impact of GCC National Visions on Long-Term Economic Growth
A range of strategic growth plans, like the UAE’s National Vision initiatives, emphasize diversification away from hydrocarbons to create more sustainable economies. Strobaek explained that gradual adjustments in oil output are essential for these economies to remain competitive globally. If GCC oil producers reverse output cuts, careful fiscal tightening will be necessary to manage widening deficits.
Geopolitical risks, particularly in neighboring regions, remain a concern. To mitigate these uncertainties, regional investors are encouraged to adopt balanced investment strategies that diversify their assets and protect against unexpected downturns.
Oil Price Stability Amid Global Geopolitical Tensions
Strobaek suggests that oil prices are likely to remain stable, even amid rising geopolitical tensions. “OPEC has a significant spare capacity, estimated at around 5 million barrels per day, which can help offset potential supply disruptions,” he said. This buffer capacity allows the organization to respond swiftly to fluctuations in supply and demand, keeping Brent oil prices around $70 per barrel.
However, any escalation in geopolitical risks could lead to temporary price spikes. Strobaek remains confident that OPEC’s resources will enable it to counter these risks effectively.
Rising Demand for Gold: Safe Haven Amid Market Volatility
As geopolitical risks and financial market volatility intensify, global demand for gold has surged. Central banks, particularly in emerging markets, are diversifying their reserves, with gold becoming a key hedge against inflation and economic uncertainty.
Strobaek predicts continued demand for gold, driven by lower Fed rates, a neutral US dollar outlook, and growing interest in safe-haven assets. He expects flows into gold exchange-traded funds (ETFs) to rise as real interest rates decline, with a 12-month price target of $2,900 per ounce. The upcoming US election could also influence gold prices, with potential upward movement if geopolitical tensions increase.
Infrastructure Overhaul: The Key to a Sustainable Global Economy
One of the most critical global economic trends, according to Strobaek, is the massive overhaul of infrastructure to support sustainable, low-carbon growth. Demographic shifts and technological advancements are driving this transformation, creating new investment opportunities worldwide.
Governments, institutions, and private investors are heavily involved in revamping infrastructure across power, transport, water, and communication sectors. “At Lombard Odier, we view infrastructure as a key structural trend reshaping the global economy,” Strobaek said. With energy and transportation infrastructure at the forefront, water and communication networks are also receiving significant attention.
This transition to a more sustainable infrastructure is not only a necessity but a valuable investment opportunity for global investors looking to align with long-term economic shifts.
Prospects for the UAE’s Economic Landscape
With a commitment to economic flexibility, strategic ties to the US dollar, and an eye toward sustainable growth, the UAE is well-positioned to lead the GCC’s economic landscape. Its diversified economy, driven by innovation and a strong non-oil sector, makes it a resilient player in the global economy.
Strobaek believes that while challenges remain, the UAE’s robust policies and strategic vision provide a stable foundation for continued economic success.
Wrapping Up: A Bright Future for the UAE’s Economic Growth
In summary, the UAE’s strategic positioning, combined with forward-looking policies and significant investments in infrastructure, paves the way for sustainable economic growth. As a regional powerhouse, the UAE’s influence on the GCC economy is likely to grow, offering valuable insights for global investors and a stable future for its citizens.
