United Arab Emirates flag United Arab Emirates: Economic and Political Overview

The economic context of the United Arab Emirates

Economic Indicators

The United Arab Emirates’ economy rebounded well from the COVID-19 crisis, growing 7.9% in 2022 and an estimated 3.4% in 2023, fueled by robust domestic activity. Forecasts for 2024 indicate a non-hydrocarbon GDP growth surpassing 4%, driven by the tourism, construction, and real estate sectors. Anticipated for 2024 is a 7% year-on-year increase in tourism receipts, reaching USD 43.7 billion (around 9% of the GDP). This surge is poised to further contribute to a rise in private consumption. Conversely, government consumption, accounting for approximately 12% of the GDP, will primarily focus on business reforms and incentives, rather than implementing stimulus programs to boost consumption. For the year as a whole, the IMF forecasts growth at 4%, followed by 4.2% in 2025.

The UAE’s public finances are sound. Supported by elevated oil prices, both fiscal and external surpluses maintain their strength. Projections for 2023 indicate a fiscal balance of around 5% of GDP, underpinned by robust economic activity and oil revenue. The gradual implementation of a corporate income tax, initiated in June 2023, is poised to contribute to increased non-oil revenue in the medium term. The consolidated UAE government debt-to-GDP ratio decreased to 29.4% of GDP in 2023 (from 31.1% one year earlier) and should follow a downward trend over the forecast horizon (28.3% by 2025). This decline is further influenced by the Dubai Emirate's commitment to reducing its public debt by EAD 29 billion in accordance with its Public Debt Sustainability Strategy. Simultaneously, the current account surplus is anticipated to surpass the medium-term level significantly in both 2023 and 2024. Nevertheless, the seven Emirates have varied debt profiles, with the Emirate of Dubai recording the highest level, at 78% of its GDP in 2022 (Fitch). Furthermore, the UAE’s Central Bank and sovereign wealth funds own important foreign assets, providing the country with a large liquidity cushion (Abu Dhabi holds the world's fourth-largest sovereign wealth fund) and making the country a net creditor at the global level. Overall, the Federation is estimated to have around USD 700 billion of assets in its sovereign wealth funds (Coface). In 2023, inflationary pressures moderated gradually to reach 3.1%; albeit a further reduction is expected for 2024 (2.3% as per the IMF projections), increasing rental prices are expected to exert upward pressure on the housing component of the CPI basket. As a result, inflation is likely to remain above the average observed in 2020-2022, which hovered around 1.3%.

The UAE has one of the highest per capita income levels in the world (estimated at USD 88,962 in 2023 at PPP by the IMF) and a highly developed welfare system. It also has one of the lowest rates of unemployment in the Middle East, at 2.8% in 2022 according to the World Bank (while Dubai enjoys the lowest unemployment level in the world, at around 0.5%) and depends heavily on foreign labour (more than 85% of the workforce). A policy of “Emiratisation” has been launched to encourage the employment of the local workforce; nevertheless, the unemployment rate among nationals continues to be considerably high compared to the rate among non-nationals (it varies according to the emirate and is the highest in Abu Dhabi).

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 507.06504.17527.80550.24577.75
GDP (Constant Prices, Annual % Change) 7.93.43.54.24.3
GDP per Capita (USD) 52,62551,90953,91655,78158,139
General Government Gross Debt (in % of GDP) 31.130.930.330.330.1
Inflation Rate (%) 4.81.62.12.02.0
Current Account (billions USD) 59.0446.7741.0438.1138.40
Current Account (in % of GDP) 11.69.37.86.96.6

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

According to the latest figures from the World Bank, agriculture contributes to 0.8% of GDP and employs a mere 2% of the workforce, as most of the country is unsuitable for agriculture and animal husbandry, with an agricultural area of only 390,000 ha (FAO). Hence, around 90% of UAE's food is imported (USDA). Fishing and date-growing are among the main agricultural activities. Despite limited water resources, the UAE government continues to look for new technologies to support the local production of certain strategic commodities.

Manufacturing activities have seen unprecedented growth in recent years, particularly in sectors such as metal processing, furniture, industrial preparation of foodstuffs, aluminium production, construction materials, fertilisers, the petrochemical industry, fibreglass and real estate. Industry now comprises 51.5% of GDP and employs 27% of the workforce. The portion of GDP from the oil and gas sector has declined gradually (to about 30%, according to the latest estimates) owing to a successful economic diversification policy. The United Arab Emirates is the world's 7th largest oil producer with significant reserves: its oil and gas reserves are estimated to last approximately 100 years at the current rate of consumption. “Operation 300bn”, a 10-year strategy developed by the Ministry of Industry and Advanced Technology (MoIAT), seeks to expand the contribution of the industrial sector from AED 133 billion to AED 300 billion by 2031. Manufacturing plays a significant role in the UAE's GDP, ranking as the third-largest sector by nominal GDP share. In 2022, manufacturing contributed nearly 10% to the overall nominal GDP of the UAE, with Dubai and Abu Dhabi showing slightly lower proportions at around 8.7% and 6%, respectively; whereas Emirates like RAK and Sharjah have substantial industrial activities.

The tertiary sector contributes 47.7% of the GDP and employs 71% of the workforce. The main sub-sectors are international trade, air transport, financial activities and tourism. The travel and tourism sector, in particular, has a total contribution of around 12% of the GDP, mainly driven by the Emirate of Dubai (UAE Official Portal). This sector was severely affected by the COVID-19 pandemic and recorded a contraction. Despite that, tourism restarted growing following the lifting of travel restrictions (for example, Dubai welcomed 12.45 million overnight visitors in Jan-Sep 2023, up 23% y/y and exceeding the previous record registered in 2019 of 12.08 million visitors). Lastly, the aviation sector has been the key driver of Dubai's GDP growth.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 1.7 27.2 71.1
Value Added (in % of GDP) 0.9 47.5 51.6
Value Added (Annual % Change) 28.5 2.5 4.9

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
76,9/100
World Rank:
14
Regional Rank:
1

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
7.63/10
World Rank:
20/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

See the country risk analysis provided by Coface.
 

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Sources of General Economic Information

Ministries
Ministry of Finance
Statistical Office
Federal Competitiveness and Statistics Authority
Central Bank
Central Bank of the United Arab Emirates
Stock Exchange
Abu Dhabi Securities Exchange
Dubai Financial Market (DFM)
Economic Portals
Erutledge: Gulf Cooperation Council Economics
 

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Latest Update: April 2024