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Moody’s is optimistic about the UAE’s economic outlook: The UAE is expected to see the biggest y-o-y jump in growth among emerging markets next year, with a projected 4.8% growth next year, up one percentage point from 3.8% in 2024, according to a Moody’s report picked up by Al Etihad. The report credited the country’s strong domestic demand as the main factor driving the forecast.
The UAE bucks the broader trend: Overall GDP growth for the 23 largest emerging market economies is expected to slow to 3.8% in 2025, down from 4.1% in 2024, according to the report. India is expected to remain the fastest-growing emerging economy, with growth forecast at 6.6% in 2025, although it represents a slowdown from 7.2% in 2024.
We’re also leading growth in the MENA region, with Saudi Arabia following closely at 4.7% and Egypt projected to grow around 4% in 2025.
Sovereign credit fundamentals for 2025 are expected to remain stable, with steady economic growth and more predictable financing conditions helping “governments maintain or even slightly cut debt,” Moody’s said in a separate press release.
The challenges: Geopolitical, social, and environmental risks — including ongoing conflicts in Ukraine and the Middle East — “complicate policy strategies and expose sovereigns to tail shocks,” potentially impacting credit, the report said. Increased US-China trade tensions, high youth unemployment, and income inequality were also cited as risk factors.
“The room to respond to shocks is limited,” the report notes, as sovereigns find their budgets more restricted amid increased spending.
Frontier markets are also expected to face persisting liquidity challenges, with limited access to affordable debt and potential new debt repayment defaults, despite the lower interest rate environment as central banks ease monetary policy.
