The economic context of the United Arab Emirates

Economic Indicators

For the latest forecasts on the economic impacts caused by the coronavirus pandemic, please consult the OECD Economic Outlook Interim Report Coronavirus: the world economy at risk (March 2020) and the IMF's policy tracking platform Policy Responses to COVID-19 for the key economic responses from governments.

After a subdued economic performance in recent years, partly due to cuts in oil output as part of OPEC agreements, continued corporate restructuring, reduced government investment and declining real estate prices, economic activity is expected to pick up in the United Arab Emirates in the future. The country recorded a relatively modest growth of 1.3% in 2019 amid a slowing global economy, trade and geopolitical tensions and weaker energy demand. According to the updated IMF forecasts from 14th April 2020, due to the outbreak of the COVID-19, GDP growth is expected to fall to -3.5% in 2020 and pick up to 3.3% in 2021, subject to the post-pandemic global economic recovery, conclusion of a rising business optimism, fiscal stimulus and higher government and private sector investments related to the postponement of Dubai’s Expo 2020.

The Emirati government has introduced a policy of fiscal easing to enable economic recovery. Structural reforms stepped up, along with the announcement of a new plan for a fiscal stimulus over the next years and increased public investment ahead of World Expo 2020. The 2019 budget has been the largest in the country’s history, with a 17.3% increase compared to the previous year. Such policies should lead to further fiscal deficits of around 2% of GDP in 2019-2020, however the country should have no problem in financing it (in September 2019 Abu Dhabi issued USD 10 billion in bonds to finance the deficit, its first debt issuance in two years). Overall, 2019 revenue growth has been modest due to low oil prices and fee reductions, partially counterbalanced by VAT revenue. Total public debt is low, estimated at 20.1% in 2019 with a stable outlook for 2020 and 2021 (20.3%). UAE’s Central Bank and sovereign wealth funds own important foreign assets, providing the country with a large liquidity cushion (Abu Dhabi holds world's fourth largest sovereign wealth fund) and making it a net creditor at global level. By the end of 2019 the government approved a zero-deficit federal budget for 2020, of which 38% has been allocated for social development and social benefits programs, 14% for infrastructure and economic resources and almost 15% for public, higher and university education programs. In recent years the country has been trying to diversify its oil-dependent economy, mainly developing strong financial and tourism sectors. Abu Dhabi has invested in alternative forms of energy production and the country's first nuclear power station, Barakah Power Plant, is expected to open in 2020 after facing several delays. The introduction of a 5% VAT in the UAE in 2018 had prompted a moderate rise in inflation, however in 2019 the country experienced deflation (around -1.9% according to the IMF), mainly due to a continued decline in housing costs. The inflation rate should remain negative in 2020 and increase to a positive rate of 1.5% in 2021, according to the latest World Economic Outlook of the IMF (April 2020).

The UAE has one of the highest per capita income levels in the world and a highly developed welfare system. It also has one of the lowest rates of unemployment in the Middle East (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 employment of the local workforce. Nevertheless, unemployment rate among nationals continues to be considerably high compared to the rate among non-nationals (it varies emirate by emirate and has the highest rate in Abu Dhabi).

Source: IMF – World Economic Outlook Database, 2016

Note 1: (e) Estimated Data

Note 2: The following indicators were updated by the IMF in April 2020: GDP (Constant Prices, Annual % Change), Inflation Rate (%), Unemployment Rate (% of the Labour Force) and Current Account (in % of GDP); the rest of the indicators were last updated in October 2019.

Note 3: The indicator GDP (Constant Prices, Annual % Change) was updated by the IMF in June 2020.

Main Sectors of Industry

According to the latest figures from the World Bank, agriculture contributes to 0.7% of GDP and employs a mere 0.4% of the workforce, as most of the country is unsuitable for agriculture and animal husbandry. Hence, around 85% of UAE's food is imported. Fishing and date-growing are among the main agricultural activities.

Manufacturing activities have seen an unprecedented growth in recent years, particularly in sectors such as metal processing, furniture, industrial preparation of food stuffs, aluminium production, construction materials, fertilisers, the petrochemical industry, fibreglass and real estate. Industry now comprises 46.8% of GDP and employs 23% of the workforce. The portion of GDP from oil and gas sector has declined gradually (30% of GDP according to latest estimates) owing to a successful economic diversification policy. The United Arab Emirates is the world's 8th largest oil producer with significant reserves. Its oil and gas reserves are estimated to last approximately 100 years at the current rate of consumption.

The tertiary sector contributes 52.5% of GDP and employs nearly three-quarters of the workforce (73%). The main sub-sectors are international trade, air transport, financial activities and tourism. The last one, in particular, has a total contribution of around 12% of GDP, mainly driven by the emirate of Dubai.

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

Indicator of Economic Freedom

Definition

Score:

77,6/100

World Rank:

9

Regional Rank:

1

Economic freedom in the world (interactive map)

Business environment ranking

Definition

Score:

7.22

World Rank:

30/82

Country Risk

See the country risk analysis provided by Coface. 

COVID-19 Country Response

COVID-19 epidemic evolution

To find out about the latest status of the COVID19 pandemic evolution and the most up-to-date statistics on the COVID19 disease in the United Arab Emirates please visit the Department of Health’s Covid-19 webpage and the National Emergency Crisis and Disasters Management UAE Coronavirus (COVID-19) Updates pages with the official data.

To find out about the latest status of the COVID19 pandemic evolution and the most up-to-date statistics on the COVID19 disease in Thailand please visit the Thai Department of Disease Control Corona Virus Disease (COVID-19) website.
For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.

Sanitary measures

To find out about the latest public health situation in the United Arab Emirates and the current sanitary measures in vigour, please visit the “Primary governmental efforts to contain COVID-19” and “Disinfection and testing for COVID-19”

Travel restrictions

For information on the travel restrictions undertaken by the United Arab Emirates government, please consult Travel Ministry of Foreign Affairs and International Cooperation’s Alerts and Warnings and the UAE’s Washington embassy’s webpage “Novel Coronavirus (COVID-19): Information on UAE Response”.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to the UAE on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

For information on the economic recovery scheme put in place by the UAE  government to address the impact of the COVID19 pandemic on the economy, reference the Central Bank of the UAE’s website.

For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the UAE government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to the UAE in the IMF’s Policy Tracker platform.

Support plan for businesses

For information on the local business support scheme established by the Emirates government to help small and medium-sized companies to deal with the economic impacts of the COVID19 epidemic on their activity, the website Economic support to minimise the impact of COVID-19  has several emergency programs for business.

For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the OECD's SME Covid-19 Policy Responses document.

You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.

Support plan for exporters

There are no specific support plans for exporters in the UAE so far. For future possible up-to-date information please visit the website of the UAE Ministry of Economy. Exporters can also refer to the website Economic support to minimise the impact of COVID-19 .