UAE Non-Oil Sectors Drive 3% Growth Despite Regional Conflict Impact

UAE Economy Posts 3 Percent Growth in First Quarter as Non-Oil Sectors Lead

At Dh485 billion ($132 billion), the UAE’s gross domestic product in the first quarter of 2026 delivered 3 percent annual growth, even as the country absorbed the economic shock of regional military conflict. The headline figure matters less than what sits beneath it: the non-oil sector now accounts for 79.4 percent of national output, a structural shift that has become the central pillar of the emirate’s economic strategy.

Non-oil activity expanded faster than the overall economy, growing 4.8 percent year-on-year. That acceleration reflects sustained capital inflows and foreign investment into high-value sectors, despite geopolitical uncertainty that would have rattled less-diversified economies. The first quarter included one month of the Iran war, during which the UAE faced daily Iranian missile and drone attacks that disrupted activity across multiple sectors. The government’s assessment concluded that regional crisis effects remained confined to a limited number of activities and did not derail the broader growth trajectory.

Financial and insurance activities led all sectors, posting 17.3 percent growth and contributing 2.44 percentage points to overall non-oil expansion. Construction followed at 8.1 percent, human health and social work activities grew 7.7 percent, and information and communication expanded 5.9 percent. Professional, scientific and technical services combined with administrative and support functions rose 4.9 percent. Real estate added 4.8 percent, public administration and defence 4.5 percent, and wholesale and retail trade 2.6 percent.

The UAE’s two financial centres were standout performers. Abu Dhabi’s ADGM reported a 57 percent increase in assets under management during the three-month period, a signal of continued capital confidence despite war-related uncertainty. Meanwhile, Dubai International Financial Centre saw companies register at a record pace in the first half of the year, drawing banks, wealth managers, asset managers and hedge funds from global markets.

Non-oil exports emerged as the sharpest economic driver of all. Shipments reached Dh452.8 billion in the first half of 2026, representing 23.9 percent growth and the highest expansion rate among foreign trade components. The performance reflects the impact of Comprehensive Economic Partnership Agreements, which have opened new markets and strengthened manufacturing, trade and logistics operations. The government credits trade openness with stimulating domestic production and enhancing competitiveness in industrial and services sectors, according to reporting at https://www.thenationalnews.com/business/economy/2026/08/04/uae-economy-grows-3-in-first-quarter-on-strong-non-oil-sector-performance/.

The conflict began on February 28, when Israel and the US launched strikes on Iran, prompting Tehran to attack Arab neighbours and close the Strait of Hormuz. The disruption extended across more than four months. The IMF noted in June that Gulf states maintained growth momentum, albeit at reduced rates, and projected a UAE rebound in the second half of the year, supported by export recovery following the country’s exit from OPEC.

Credit rating agencies have held firm on the emirate’s standing. Fitch retained its long-term issuer default rating of AA- in May, noting that oil export revenue remains strong due to elevated crude prices and will offset immediate negative conflict impacts. The agency highlighted the UAE’s fiscal and external buffers, anchored by Abu Dhabi’s sovereign net foreign assets estimated at approximately 164 percent of UAE GDP in 2025. That reserve level places the emirate among the highest-buffered sovereigns in Fitch’s ratings universe, a fact that matters directly to investors pricing risk in the region.

Government officials framed the results as validation of diversification strategy. Minister of Cabinet Affairs Mohammed Al Gergawi characterized non-oil growth as “the outcome of integrated government policies and initiatives working as one system towards one goal: consolidating the UAE’s standing as a global leader in competitiveness, excellence and future readiness.” Minister of Foreign Trade Dr Thani Al Zeyoudi stated that strong export performance confirmed the pivotal role of trade openness in driving economic diversification and boosted the country’s appeal to high-quality investors.

Minister of Economy and Tourism Abdulla bin Touq linked the quarterly performance to a longer-term target: the “We the UAE 2031” vision to double the national economy to Dh3 trillion by 2031. One quarter of conflict-era growth does not guarantee that trajectory, but it does demonstrate the resilience of the diversification model under conditions that would have tested far less ambitious economic blueprints. Whether the second-half rebound the IMF projects materializes, and at what pace, will be the more consequential test.