The UAE’s 2026 federal budget has been set at AED 92.4 billion, representing a 29 per cent increase from the AED 71.5 billion budget of 2025. The expansion reflects both the government’s confidence in sustained revenue growth and its commitment to accelerating investment in infrastructure, social services, and the programmes that underpin the country’s long-term economic diversification agenda.
The budget increase is supported by a strong underlying economic picture. The UAE’s GDP grew 6.2 per cent year-on-year to reach AED 1.9 trillion ($517.2 billion) in 2025, with non-oil GDP expanding even faster at 6.8 per cent annually to AED 1.5 trillion. The country’s non-oil foreign trade surged 26 per cent in 2025 to exceed $1 trillion — a milestone that marks the first time the UAE has crossed this threshold and that underscores the depth of the trade and logistics ecosystem built over the past two decades.
Revenue Diversification Bearing Fruit
The UAE’s ability to increase its federal budget by nearly a third in a single year without relying exclusively on oil revenues is testament to the maturation of its diversification strategy. Corporate tax, introduced at a 9 per cent rate in 2023, has now been in operation long enough to contribute meaningfully to federal revenues. Combined with VAT receipts, tourism levies, free zone fees, and the financial services sector’s growing contribution, the UAE’s revenue base is significantly more resilient than it was a decade ago.
Sheikh Maktoum bin Mohammed, Deputy Prime Minister and Minister of Finance, has noted that the UAE successfully turned the global challenges of 2025 — including geopolitical disruption, energy market volatility, and global supply chain stress — into growth opportunities. The country’s position as a neutral trade hub and a reliable destination for capital has seen it absorb flows that might otherwise have gone to more geopolitically exposed markets.
CEPA Network Expanding Trade
A significant contributor to the $1 trillion non-oil trade milestone is the UAE’s Comprehensive Economic Partnership Agreement (CEPA) programme, which has delivered preferential trade access with a growing list of major economies. Agreements with India, Indonesia, Türkiye, Israel, Cambodia, Georgia, Costa Rica, Vietnam, and South Korea — among others — have created a network of bilateral trade corridors that give UAE-based exporters and re-exporters meaningful tariff advantages in major consumer and manufacturing markets.
The South Korea CEPA, which entered into force in 2026, is expected to be particularly significant for the UAE’s metals, petrochemicals, and advanced manufacturing sectors, where Korean industrial buyers represent a large and growing customer base. South Korean consumer goods and electronics, in turn, are expected to flow more freely into UAE and GCC markets under the agreement’s preferential tariff schedules.
Budget Priorities for 2026
Within the AED 92.4 billion budget, social development — covering education, healthcare, and social protection — accounts for the largest share of expenditure, consistent with the government’s stated priority of investing in human capital. Infrastructure spending, including projects related to water, transport, and energy, is the second-largest category, reflecting the continued build-out of physical capacity to accommodate a growing population and economy.
Digital economy and technology initiatives — covering AI infrastructure, smart government platforms, and cybersecurity — are among the fastest-growing budget lines, reflecting the government’s view that digital capability is a strategic priority on a par with physical infrastructure in determining the UAE’s long-term competitive position.
Broader GCC Context
The UAE’s fiscal expansion stands in contrast to the more constrained spending environment in some GCC peers. Saudi Arabia, which is running a wider fiscal deficit as it funds Vision 2030 projects, and Oman, which completed a structural fiscal adjustment programme over 2021-to-2024, both face tighter budget headroom than Abu Dhabi. The UAE’s diversified revenue base and the absence of a major national transformation programme of comparable cost give it more latitude to invest from a position of strength rather than deficit financing necessity.
