<div id="readability-page-1"><div>N. SaeedThe UAE economy is expected to slightly shrink in 2026 due to the Iran war impact but will sharply rebound in 2027 as the Gulf nation embarks on major projects to boost its crude and gas production.The contraction in the GDP of the second largest Arab economy is mainly a result of lower oil export volumes following the closure of Hormuz Straits by Iran, the Washington-based Institute of International Finance (IIF) said.Overall growth is expected to weaken in 2026 as hydrocarbon output declines and non-hydrocarbon activity decelerates, IIF said in a study on the UAE.“Nevertheless, substantial fiscal and financial buffers give the authorities considerable policy space to maintain spending, support liquidity, and preserve confidence in the financial system,” the report said.“From 2027 onward, improving regional stability, recovering tourism and trade, rising energy production, and renewed capital inflows are expected to support a gradual rebound,” it added.Forecasts by IIF, which comprises hundreds of Western banks, showed the UAE’s GDP would decline by around 0.4 percent this year after recording strong growth of 5.3 percent . But it is projected to rebound by 5.2 percent in 2027 and 6 percent in 2028.The contraction in 2026 is a result of a decline in oil sector GDP by around 8.2 percent, according to the report, which said the GDP rebound in the next two years will be driven by a strong recovery in the oil sector of around 7.6 percent in 2026 and 10.8 percent in 2028.The UAE’s oil and gas exports fell sharply in March and April due to the closure of Hormuz as most of the crude supplies to the global market were exported via the Abu Dhabi pipeline to Fujairah in the Gulf of Oman outside Hormuz.The Abu Dhabi National Oil Company (ADNOC), which manages the emirate’s hydrocarbon sector, said last week that it is fast-tracking the construction of a pipeline that will allow it to double the amount of oil it exports without using Hormuz.ADNOC is prioritising the second West-East pipeline, which will run to the port of Fujairah and is due to become operational next year, it said.“Crude oil production capacity is likely to increase further in 2027 and beyond while natural gas production expansion will support both export revenues and domestic energy security. These developments are likely to reinforce Abu Dhabi’s position as the UAE’s primary fiscal and economic anchor,” IIF said.The UAE, which controls more than 100 billion barrels of proven oil deposits, has said it is targeting crude output of 5 million barrels per day (bpd) following its decision to exit OPEC.“Besides higher crude production, the UAE will be able to boost gas output as increasing oil production will allow for an increase in the production of associated gas,” said Jamal Banoon, head of the Riyadh-based SMS economic consulting centre.The IIF report showed capital flow into the UAE is expected to fall from around $124 billion in 2025 to $109 billion in 2026 before rising to $116 billion in 2026.Downside risks to the positive forecast include continued Iranian attacks and prolonged oil export disruptions, it said, noting that the UAE took the brunt of those attacks.“In a downside scenario where Iranian attacks persist, hydrocarbon exports could fall sharply, non-hydrocarbon growth could slow to below 1 percent , and private investment could weaken. While the UAE retains substantial buffers, prolonged disruption would erode growth momentum and dampen capital inflows, reinforcing downside risks to the near-term outlook,” the report said.“The UAE is not emerging from the Iran war as a broken growth story. It is emerging as a more exposed, more security-conscious, and more expensive version of the same growth story.”(Reporting by N Saeed; Editing by Anoop Menon)(anoop.menon@lseg.com)Subscribe to our Projects' PULSE newsletter that brings you trustworthy news, updates and insights on project activities, developments, and partnerships across sectors in the Middle East and Africa.Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.</div></div>

The UAE economy is projected to contract by 0.4% in 2026 due to the Iran war's impact on oil exports, but is expected to rebound by 5.2% in 2027 and 6% in 2028 as major oil and gas projects are initiated. The decline in GDP is attributed to an 8.2% drop in the oil sector, while recovery will be supported by increased production and capital inflows. However, risks remain from potential Iranian attacks and export disruptions.

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ZAWYA: Oil projects to boost UAE economy