Capital inflows top outflows in UAE and Saudi Arabia

GCC inflow $73.5bn in 2024

Drop in FDI to Egypt expected

The UAE and Saudi Arabia attracted more investments than they exported in 2024 for the first time in more than 10 years, the Institute of International Finance said.

The reversal was a result of improved business atmosphere and advanced infrastructure in the UAE and, in Saudi Arabia, heavy domestic investments by the Public Investment Fund, the kingdom’s sovereign wealth fund.

In a report on Wednesday, the Washington-based IIF also said it expected an increase in foreign direct investment inflow into the UAE and Saudi Arabia in 2025.

While the combined FDI flow into six Middle East and African economies (UAE, Saudi Arabia, Egypt, Lebanon, Nigeria and South Africa) is expected to decline slightly to around $192 billion, this is because of a drop in inflows to Egypt, the IIF said.

The report estimated that the UAE and Saudi Arabia, the largest Arab economies, would account for nearly 75 percent of the total flows to the six countries this year.

“The UAE remains the main regional destination of FDI inflows, attracting about $32 billion in 2024, nearly 6.1 percent of GDP,” it said.

“The friendly business environment, excellent infrastructure, diversified economy by regional standards, combined with the recent economic deals with the United States will lead to further increase in FDI flow to the UAE.” 

Saudi Arabia has also improved its business environment significantly, which should continue to help attract FDI, particularly in the context of the recent economic and defence deal with the US, which represents more than 400 western banks and financial institutions, the IIF said.

“Capital outflows from Saudi Arabia and the UAE have exceeded non-resident capital inflows during 2013-2023,” the report said.

“This has been reversed in 2024, as non-resident inflows of $142 billion exceeded resident outflows of about $127 billion, as the authorities in Saudi Arabia increasingly relied on PIF financing of mega-projects. We expect this to continue in 2025 and 2026.”

A report by the UN Conference on Trade and Development last week showed FDI flow into the UAE and Saudi Arabia accounted for 83 percent of the 2024 capital flow into the GCC, which also groups Kuwait, Qatar, Oman and Bahrain.

FDI flow to the GCC totaled around $73.5 billion last year, up from $67 billion in 2023. Outflow of the six members rose to $58.5 billion from $52 billion in the same period.

The UAE was also second only to the US in the number of announced greenfield projects, with 1,369 launched in 2024, the report said.