United Arab Emirates

Stronger growth in 2025 thanks to non-oil activity

Growth in the non-oil sector is expected to support the economic expansion in 2025. Wholesale and retail, transportation, construction, and financial services in particular will remain the main contributors to growth. The delayed unwinding of oil production cuts by OPEC+ to April 2025 will continue to put pressure on the oil sector. However, as these cuts should gradually disappear over the rest of the year, the oil sector’s contribution to growth is expected to increase alongside that of investments in the gas sector. Moreover, low inflation and monetary easing in line with the US Fed will support private consumption (around 50% of GDP). In addition, the new practices (golden visa, remote work visa, etc.) that the UAE has started to implement to increase the number of migrant workers will also support the increase in spending. Furthermore, the UAE's announcement of its largest-ever budget for 2025 suggests that the contribution of public spending (around 12% of GDP) to growth may increase. The latter contribution will be mainly driven by increased infrastructure investment and other capital expenditure. Last, the favourable business environment and growth-enhancing reforms (such as allowing foreigners to fully own companies under the new commercial law, moving weekends to Saturday and Sunday to match trading partners' working days, etc.) are expected to encourage more foreign investment into the country (nearly 6% of GDP in 2023). The economic authorities are expected to introduce similar reforms to respond to the increasing competition of Saudi Arabia to become an alternative trade and business hub in the region.

In light of the currency peg, the UAE Central Bank is poised to maintain its rate-cutting policy throughout 2025, mirroring the approach taken by the US Federal Reserve. We anticipate that the robust domestic demand, coupled with population growth, will sustain inflationary pressures from the demand side. Housing price increases may also exert some pressure on inflation. However, the low level of global energy prices is expected to offset inflationary pressures through transport prices. Given these risks, the central bank may adopt a gradual and cautious stance in the rate-cutting process.

Narrower twin surpluses expected in 2025

The fiscal surplus is projected to narrow in 2025, in line with the announcement of the largest budget in the country's history. Lacklustre oil revenues will meet higher expenditures related to energy and large infrastructures meant to achieve the economic diversification goals. The government has set a target of investing between AED 150bn (USD 40.8bn) and AED 200bn (USD 54.5bn) in the country's renewable power capacity by 2030, as provided in the National Energy Strategy. However, the fiscal surplus will continue to feed the sovereign wealth fund and enable the country to continue investing abroad.

In 2025, the current account balance is forecast to remain in surplus, albeit at a lower level than previously. This is due to an anticipated increase in imports resulting from infrastructure investments. Concurrently, remittance outflows (around 7.5% of GDPin 2023) from foreign workers will add to this trend. In addition, the UAE is underutilising their current oil production capacity (hydrocarbons account for around 20% of goods exported) which stands at 4.85 million (mn) barrels per day (b/d). Current capacity is well above the country's actual output of 2.96 mn b/d. The postponement of the OPEC+ oil production hike until at least April 2025, coupled with the prevailing lower energy prices, will have an adverse impact on the UAE's export revenues.

Political stability in a volatile region

The UAE is set to maintain its political stability following the appointment in May 2023 of the eldest son of the Federation’s and Abu Dhabi’s leader as Crown Prince of Abu Dhabi; he is also the potential successor to the presidency of the Federation. The current stability is set to reinforce the country's position as a global and regional hub for finance, shipments and trade. However, the Emirates' imperfect transparency and democracy will continue to present challenges.

The post-Assad developments in Syria may offer both opportunities and risks for the UAE. On the one hand, the UAE's construction and energy companies may find opportunities in the reconstruction process. On the other, the change in the regime could also result in regional power shifts and heightened uncertainty, which may impact the business environment.

In 2025, the capacity of the UAE to maintain a balanced approach upon the arrival of the new US administration, the growing influence of China in the Middle East and the evolving interests of Russia will be crucial.

Payment

The most common methods of payment in the United Arab Emirates (UAE) are cash, credit and debit cards, Open Accounts, Letters of Credit, Documentary Collections, and cheques.

Cheques are the most common and preferred method of payment in the country, especially in commercial transactions, as there are no costs involved with issuing cheques, unlike transactions that are backed by a Letter of Credit or any other type of a bank guarantee. Cheques constitute a reliable debt recognition title that may be enforced directly before a judge. In addition, UAE criminal law states that a person who delivers a cheque in bad faith without sufficient consideration may be imprisoned.

Until 2016, post-dated cheques were considered the best protection against late payments, and were frequently used in the UAE as guarantees, as bounced cheques are considered as a criminal offence. The new law is silent regarding Non-Sufficient Funds (NFS) cheques, and only states in Article 32 that all the legal proceedings, procedures, and execution procedures against the debtor’s assets shall be suspended once a decision is initiated until the ratification of the scheme of composition. Composition is defined in Article 5 of the new law as proceedings aiming to assist the debtor to reach a settlement with creditors pursuant to a scheme of composition under the supervision of the court, and with the help of a trustee to be appointed in accordance with the provisions of this law. In light of the above, any claims or legal proceedings filed against the debtor – whether related to NSF cheques or another instrument (this also applies to criminal proceedings relating to NSF or bounced cheques) – will be suspended once the court has accepted the debtor’s application for the aforementioned prevented composition. It worth noting that any claim related to an NSF cheque will be treated in the same way as any other unsecured claim which may be filed against the debtor.

UAE banks are part of the Society for Worldwide Interbank Financial Telecommunication (SWIFT), which is used when transferring money between banks, particularly for international wire transfers.

Debt Collection

Amicable phase

Debt collection begins with the amicable approach, during which the debtor receives a notice for payment, followed by a phone call from the creditor or an agency, with the goal of reaching a payment agreement.

Legal proceedings

The UAE Courts are comprised of: the Court of First Instance; the Court of Appeals; the Abu Dhabi Supreme Court.

Located in each Emirate, courts of first instance have general jurisdiction and include a Civil Court, a Criminal Court and a Shariah Court. Following a judgement from one of these courts, the concerned parties have the right to appeal to the Court of Appeals on factual and/or legal grounds. Following this, aggrieved parties have the right to appeal to the Supreme Court on matters of law only. Shariah Court handles civil matters between Muslims.

Fast-track proceedings

An order of payment is a procedure where a party applies to the courts for summary judgment against a defendant for commercial debts, substantiated by a valid but unpaid commercial instrument such as a bill of exchange, promissory note or cheque. If a defence is filed, the dispute must be solved via an ordinary lawsuit before the court of first instance.

Ordinary proceedings

Proceedings start by filing a plaint (complaint) in the relevant court. It must meet procedural requirements, and include both the debtor’s information and the details of the debt. The court issues a summons to be served to the defendant, which includes an endorsed hearing date.

Once an answer has been filed by the debtor, the trial process is adjourned to allow the creditor to respond. Further adjournments are given so that memoranda can be submitted by both parties. Once the court believes that the case has been sufficiently pleaded, it reserves the matter for judgment. The entire proceeding is based on written submission supported by documentary evidence. The court will issue remedies in the form of specific actions and compensatory damages. Injunctive relief is not generally available and attachment orders are difficult to?obtain.

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Enforcement of a Legal Decision

A court judgment becomes enforceable once it is finalised. If the debtor fails to comply with the court’s decision, the creditor may request enforcement mechanisms before the judge, such as an attachment order, or even the imprisonment of the debtor.

Any foreign awards must first be recognized as a domestic judgment. When bilateral or multilateral reciprocal recognition and enforcement treaties exist, this requirement is simply a formality. In the absence of such agreements, an exequatur procedure is provided by domestic private international law.

The latest law update in UAE is related to commercial claims, which can now be filed via performance order lawsuits if the financial claim is subject to the enforcement of a commercial contract, or the right holder is a creditor with a commercial paper and debt is acknowledged.

Procedures and Duration of Order: Sending a notary public legal notice to the debtor. Notifying the notice to the debtor with a successful result. Five days minimum from the date the debtor receives the notice as a period to allow the debtor to settle the dues. Register the Performance Order at the court or on the electronic system of the court according to the spatial jurisdiction of each court. The decision shall be issued by the judge within 3 working days by either acceptance or rejection. In case of issuance of the decision in creditor favor, a request to notify the debtor shall be submitted. The court shall notify the debtor in the manner prescribed by the law. An appeal period of 15 days from the date of the decision is notified if the debtor will appeal. The appeal court will review the debtor defense if it’s valid the court will schedule a hearing and invite both parties to investigate, if the court see the defense is not valid, the court will reject the appeal directly. If the debtor didn’t appeal in a period of 15 days from the date, he receives the decision notice, then the execution shall take place. Duration of the whole process approximately: 90 to 120 days.

Insolvency Proceedings

On September 4, 2016, the final draft of the Federal Law on Bankruptcy was approved. The new insolvency law proposes three new insolvency procedures:

FINANCIAL REORGANIZATION PROCEDURE

An out of court, private conciliation process that is applicable to entities who have not yet formally entered the zone of insolvency, which has the aim of achieving a consensual, private settlement between parties. An independent mediator with bankruptcy expertise is appointed by the commission for a period of up to four months to oversee discussions between the debtor and its creditors.

PROTECTIVE COMPOSITION PROCEDURE (PCP)

A debtor that is (a) experiencing financial difficulties, but is not yet insolvent; or (b) has been in a state of over-indebtedness or cessation of payments for less than 45 days, proposes a compromise with its creditors outside of formal bankruptcy proceedings. The PCP includes a moratorium on creditor action (including enforcement of secured claims) and places the debtor under the control of an office holder appointed from the Commission’s (the government agency that has the authority to oversee the insolvency proceedings) roll of experts, for an initial observation period of up to three months.

Other key tools of the PCP process include the ability to raise debtor-in-possession (DIP)-style priority funding, which may be secured on unsecured assets or take priority over existing security, and ipso facto previsions that prevent the invocation of insolvency-linked contractual termination provisions – provided the debtor performs its executor obligations. The debtor is given time to file a plan, which is then voted on by creditors.

BANKRUPTCY

The procedure is split into two elements: a rescue process within formal bankruptcy proceedings, which is procedurally similar to the PCP (including an automatic moratorium and the ability to raise DIP funding);a formal liquidation procedure.

RECENT UPDATE TO BANKRUPTCY LAW:

Various changes announced on 22 October 2020, but yet to be published in the official gazette. Key change – New Concept: “Emergency Financial Crisis” (EFC), which is defined as: “A general situation that affects trade or investment in the country, such as a pandemic, natural or environmental disaster, war, etc. ”New provisions changing the Bankruptcy Law during an EFC.UAE Cabinet to determine when an EFC exists and it has yet to do so. It would appear that a UAE Cabinet decision is required before parties can rely on the new provisions; If an EFC is announced, the new law provides certain protections for debtors, including: Debtors not required to file for bankruptcy if he has failed to pay his debts within 30 days due to EFC; Debtors can still file for bankruptcy during EFC and court may elect not to appoint a trustee in the proceedings if debtor proves the disruption to his business was caused by the EFC; Creditors cannot file as the court will not accept bankruptcy applications against any debtors during the EFC.

Settlement with creditors (only applies to debtor filings):

If bankruptcy is accepted by court, the debtor may request 40 business days to negotiate settlement with his creditors. If approved by the court, it shall be published and include an invitation to creditors to negotiate settlement within 20 business days; Settlement period offered to creditors shall not exceed 12 months; If settlement reached with creditors with 2/3rds of the debt, it shall be binding on all creditors (even those who did not participate); Settlement negotiations must be in writing and approved by the court.

Last updated: December 2024