Dubai set for V-shaped recovery next year, says S&P

12/11/2026 05:45 AST

Dubai is likely to see a V-shaped recovery in 2027 after its economy contracts this year due to the regional conflict, according to S&P Global Ratings.

Olivia Grant, associate director for financial institutions ratings at S&P Global Ratings, said the bounce-back would be supported by a recovery in UAE oil production, continued construction activity, population growth and a government with room to borrow. She was speaking at a panel discussion on the Middle East war and the Dubai residential real estate outlook for 2027.

S&P's base case for the Gulf assumes the war will continue to cause disruption through 2027, but that a recovery will follow.

Grant said part of the rebound will come from the recovery in UAE oil output. A second West-East pipeline via Fujairah, expected to be in place early in 2027, will add flexibility.

Construction and finance sectors continued to expand in the first half of 2026 despite the downturn elsewhere. Major projects, including Al Maktoum International Airport, the drainage scheme and the Metro expansion, continue to be approved and are moving ahead, which Grant said should sustain construction growth into the second half.

Importantly, the Central Bank of the UAE (CBUAE) also raised its growth forecast for next year to over 10 per cent in its Quarterly Economic Review released in October, driven by both the oil and non-oil sectors.

The UAE's GDP is projected to grow by 10.4 per cent in 2027, compared with the 9.8 per cent growth it projected in its June Quarterly Economic Review. This represents an upward revision of 0.6 percentage points, as the central bank expects the UAE to reach oil production of five million barrels per day next year.

Grant noted that Dubai's population stood at about 4.8 million as of October 2026, following record growth of 7.8 per cent in 2025.

She added that government debt has stabilised at about 15 per cent of GDP after being pared back following the pandemic. Grant said this leaves room to borrow for large capital projects if needed. Costs have been kept disciplined, and non-tax revenue such as dividends and service fees is holding up.

Dubai's real GDP contracted by just over 2 per cent in the first half of 2026, Grant said, with wholesale and retail trade, tourism-related sectors and manufacturing all declining.

Khaleej Times