UAE economy stays resilient, but slowdown may test hiring in key sectors: IMF

The UAE economy has remained resilient despite the conflict and trade disruption affecting the Middle East, supported by strong fiscal buffers, policy intervention and the rerouting of oil and other trade flows, according to the International Monetary Fund.

The assessment followed an IMF staff visit to Abu Dhabi and Dubai from July 7 to 16 to review recent economic and financial developments and prepare for the UAE’s 2026 Article IV consultation. The findings are preliminary and will inform the report submitted for consideration by the IMF’s Executive Board.

IMF mission chief Said Bakhache said sound economic fundamentals, policy preparedness and a swift government response had helped contain the overall impact of the regional shock. Support measures have been directed towards maintaining financial stability, protecting essential supply chains and assisting affected sectors and households.

Non-oil sectors face a more difficult 2026

Despite that resilience, the IMF expects the UAE’s overall economy to be slightly smaller in 2026 than it was a year earlier.

The Fund attributed the decline primarily to weaker non-hydrocarbon activity as uncertainty weighs on tourism, transportation, trade and real estate. Intermittent disruption to the Strait of Hormuz has also affected activity and the movement of goods and energy exports.

The outlook marks a significant change from the IMF’s October 2025 assessment, when it projected UAE GDP growth of 5% in 2026, supported by non-oil expansion and higher hydrocarbon production. The conflict and related disruption have since altered that trajectory.

Hydrocarbon activity is expected to strengthen during the second half of the year as oil exports recover and production increases. The IMF also expects overall growth to rebound strongly in 2027, provided tourism, trade and other non-oil activities begin to normalise.

For employers, the outlook points to an uneven labour market rather than a broad-based employment contraction. Businesses in tourism, aviation, logistics, trade and property may take a more cautious approach to workforce expansion while uncertainty remains elevated, even as sectors benefiting from government investment, technology adoption and supply-chain diversification continue to recruit.

This is an editorial inference from the sectoral outlook; the IMF did not issue a specific employment or hiring forecast.

Inflation could add to workforce cost pressures

Inflation is expected to rise in 2026 as higher global energy and food prices pass through to the domestic economy, before easing over the medium term.

For HR and rewards leaders, sustained increases in living costs could bring greater attention to salary reviews, allowances and employee financial wellbeing, particularly among lower- and middle-income workers. Employers may also need to monitor whether transport, housing and food costs begin to affect retention or employee expectations.

The IMF has not directly linked its inflation outlook to wages. However, higher household costs generally create a more demanding environment for compensation planning, especially when organisations are simultaneously managing slower revenue growth or disruption to business activity.

Banking system remains capable of supporting businesses

The IMF said UAE banks remain adequately capitalised and liquid, with credit and deposits continuing to expand. While private-sector credit growth is expected to moderate alongside weaker non-oil activity, the financial system entered the conflict with strong balance sheets and capital buffers.

The Fund also highlighted the Central Bank of the UAE’s Financial Institution Resilience Package, which was introduced to help financial institutions maintain operations and continue providing services during the regional disruption.

Real-estate activity moderated during the first half of 2026 after several years of strong expansion, although prices generally remained at or above their 2025 levels. The IMF said changing market conditions should continue to be monitored.

Human capital remains part of the resilience strategy

The IMF urged policymakers to continue advancing economic diversification and structural reform while maintaining flexible responses that can be expanded should the conflict become more severe or prolonged.

It specifically identified sustained investment in technology and human capital, deeper trade integration and stronger supply-chain resilience as priorities for supporting non-oil growth and protecting the economy against future external shocks.

For employers, that reinforces the importance of continuing capability development even when immediate hiring becomes more selective. Organisations may need talent that can manage disrupted supply chains, digital operations, financial risk, cybersecurity and business continuity rather than simply adding capacity to existing operating models.

The broader message from the IMF is therefore one of resilience with caution. The UAE retains substantial financial and institutional capacity to absorb shocks, but employers in exposed sectors may still face a year of slower growth, changing workforce demand and greater pressure to plan for multiple economic scenarios.