UAE climbs to world’s No. 2 Islamic economy as sector nears $10 trillion milestone

The UAE has emerged as the world’s second most influential Islamic economy, overtaking several larger markets as it strengthens its position as a global hub for Islamic finance, halal trade, investment and digital innovation.

According to the latest State of the Global Islamic Economy Report 2025/26 by DinarStandard, the UAE climbed to second place in the Global Islamic Economy Indicator (GIEI), up from fourth position in the previous two years, reflecting the country’s growing leadership across virtually every segment of the Islamic economy.

The report comes as the global Islamic economy enters a new phase of expansion, with Muslim consumer spending reaching $2.6 trillion in 2024 and projected to surge to $3.56 trillion by 2029.         

Islamic finance assets, meanwhile, have expanded to $5.99 trillion and are forecast to approach $9.72 trillion within five years, highlighting the sector’s growing importance in global trade and investment flows.

Malaysia retained the top position in the rankings, followed by the UAE, Saudi Arabia, Indonesia and Bahrain.

The UAE’s ascent underscores its transformation into the Middle East’s principal centre for Islamic capital, cross-border trade, financial technology and halal consumer businesses.

The country ranked among the top three globally across all Islamic economy sectors and secured the top position in media and recreation. It ranked second in halal food, Muslim-friendly travel, modest fashion, halal pharmaceuticals and cosmetics, while placing third in Islamic finance.

Industry analysts say the achievement reflects years of investment in financial infrastructure, logistics networks, regulatory frameworks and digital platforms that have enabled the UAE to become a gateway linking Islamic markets across Asia, Africa and Europe.

The report highlights the UAE’s growing role as a magnet for capital. The country recorded 94 venture capital, private equity and merger-and-acquisition transactions in Islamic economy-related sectors, making it the most active investment destination globally by deal volume.

The UAE also attracted $45.6 billion in foreign direct investment, equivalent to 5.24 per cent of GDP, ranking second among Organisation of Islamic Cooperation (OIC) countries and reinforcing its status as a preferred destination for international investors.

Trade has emerged as another key pillar of the country’s success. The UAE was the seventh-largest exporter to OIC markets, recording export growth of 7.83 per cent between 2023 and 2024, supported by its strategic location, world-class logistics infrastructure and expanding network of trade agreements.

The findings align with the UAE’s broader ambition to become a leading global centre for the halal economy. Government-backed initiatives, free zones and financial institutions have increasingly focused on Islamic finance, halal manufacturing, food security and technology-driven compliance systems.

The report suggests that the next stage of growth will be driven not merely by consumer demand but by the development of complete economic ecosystems built around trust, standards and self-sufficiency.

“The Islamic economy is no longer an emerging idea. It is an emerging system,” said Rafiuddin Shikoh, Chief Executive Officer and Managing Partner of DinarStandard.

“What we are documenting this year is a global consumer and investor base increasingly acting on the conviction that economic life must align with moral life.”

The report identifies a number of high-growth opportunities expected to shape the industry’s future, including AI-powered halal certification, blockchain-enabled supply-chain traceability, Shariah-compliant digital finance, halal pharmaceuticals, clean-label cosmetics, digital-first modest fashion and culturally aligned media and entertainment.

One of the most significant trends highlighted is the rapid growth of Islamic finance, which remains the backbone of the broader Islamic economy. Assets are expected to expand by more than 60 per cent over the next five years, approaching the $10 trillion mark as governments and financial institutions deepen efforts to develop Shariah-compliant capital markets and investment products.

Consumer spending trends remain equally compelling. Halal food continues to dominate the Islamic economy, accounting for $1.53 trillion in spending last year and projected to exceed $2 trillion by 2029.

Meanwhile, Muslim-friendly travel is emerging as the fastest-growing segment. Spending is forecast to rise from $249 billion in 2024 to $424 billion by 2029, supported by growing demand for faith-conscious tourism, digital travel services and dedicated hospitality infrastructure.

Investment activity across Islamic economy sectors reached $13.1 billion through 346 deals during 2024-25, with Islamic finance attracting the largest share of capital. Saudi Arabia, the UAE, Indonesia, Azerbaijan and Türkiye emerged as the leading destinations for investment, reflecting growing confidence in both consumer-facing businesses and supporting infrastructure.

The report also points to a significant shift in Muslim consumer behaviour. Analysis of more than 86 million social media engagements found that values-based purchasing decisions have evolved beyond temporary boycott campaigns into a longer-term preference for ethical, local and alternative brands across food, fashion, technology, cosmetics and media.

For the UAE, the findings reinforce its growing influence at the intersection of finance, technology, trade and culture. As the global Islamic economy moves towards the $10 trillion threshold, the country appears increasingly well-positioned to capture a disproportionate share of future investment, innovation and consumer spending.

The report concludes that the next wave of growth will be led by nations capable of building trusted ecosystems that combine regulation, digital infrastructure, financing and supply chains. With its strong performance across all major indicators, the UAE has placed itself firmly at the centre of that transformation.