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Key Takeaways
- UAE headline inflation held at 2.1% year-on-year in June 2026, according to the Federal Competitiveness and Statistics Centre.
- The Central Bank of UAE kept its base rate at 4.40% following its July 2026 meeting, aligning with global monetary policy trends.
- Real GDP grew by 4.8% in the first quarter of 2026, driven by a 5.2% expansion in non-oil sectors, per the Federal Competitiveness and Statistics Centre.
- Abu Dhabi Securities Exchange (ADX) index rose 1.2% in July 2026, reflecting investor confidence in the non-oil economy.
- Employment in the private sector increased by 3.1% year-on-year in May 2026, as reported by the Federal Competitiveness and Statistics Centre.
The Data
ABU DHABI — The United Arab Emirates economy continues to show resilience, with headline inflation holding steady at 2.1% year-on-year in June 2026, the Federal Competitiveness and Statistics Centre reported. This marks the third consecutive month of stable price growth.
Core inflation, which excludes volatile food and energy items, edged up to 2.5% in June 2026 from 2.4% in May. Housing and utility costs rose 1.8% year-on-year, while transport prices increased 2.3%, according to the statistics office.
The Central Bank of UAE held its base rate at 4.40% following its July 2026 monetary policy meeting. The next rate decision is scheduled for September 2026. The central bank noted that current policy settings remain appropriate to support price stability.
Real GDP expanded by 4.8% in the first quarter of 2026 compared to the same period last year, driven by a 5.2% jump in non-oil sectors. The oil and gas sector grew by 2.1% during the same period, the Federal Competitiveness and Statistics Centre said.
Private sector employment rose 3.1% year-on-year in May 2026, adding approximately 120,000 jobs over the past year. The hospitality and construction sectors led hiring, the statistics office reported.
Non-Oil Sector Drives Growth
The UAE’s non-oil economy remains the primary engine of expansion, with sectors like tourism, logistics, and financial services posting strong gains. The 5.2% growth in non-oil GDP in Q1 2026 was the fastest pace in two years.
This diversification strategy is reducing the economy’s dependence on hydrocarbon revenues. The non-oil sector now accounts for nearly 74% of total GDP, up from 70% in 2020, according to the Federal Competitiveness and Statistics Centre.
What This Means
For households, stable inflation near 2% means the cost of living is rising at a manageable pace. Mortgage rates for variable-rate loans, which are tied to the central bank’s base rate, remain unchanged at around 4.4%. Wage growth in the private sector averaged 3.5% over the past year, slightly outpacing inflation.
For businesses, borrowing costs remain elevated but predictable. The stable rate environment supports investment planning, particularly in the non-oil sectors that are driving growth. Input cost pressures remain moderate, with producer prices rising 1.9% year-on-year in May 2026.
Outlook
The next key data release will be Q2 2026 GDP figures, expected in October 2026. The Central Bank of UAE will meet again in September 2026 to review its base rate. Analysts surveyed by Economic Pulse expect the rate to remain unchanged through year-end.
Key risks include global oil price volatility and potential spillovers from inflation in trading partner economies. Most analysts project UAE GDP growth of 4.5% to 5.0% for full-year 2026, supported by continued non-oil sector momentum.
Data sourced from Federal Competitiveness and Statistics Centre (FCSC) and Central Bank of UAE (CBUAE). Analysis by Economic Pulse Data Team.
Edited by Editorial Desk. Fact-checked by Editorial Desk. This is analysis, not financial advice.
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