Economy of the United Arab Emirates
November 11, 2016
The UAE has an open economy with a high per capita income and a sizable annual trade surplus. Successful efforts at economic diversification have reduced the portion of GDP based on oil and gas output to 25%. Since the discovery of oil in the UAE more than 30 years ago, the country has undergone a profound transformation from an impoverished region of small desert principalities to a modern state with a high standard of living.
The government has increased spending on job creation and infrastructure expansion and is opening up utilities to greater private sector involvement. The country's free trade zones - offering 100% foreign ownership and zero taxes - are helping to attract foreign investors. The global financial crisis of 2008, tight international credit, and deflated asset prices constricted the economy in 2009. UAE authorities tried to blunt the crisis by increasing spending and boosting liquidity in the banking sector. The crisis hit Dubai hardest, as it was heavily exposed to depressed real estate prices. Dubai lacked sufficient cash to meet its debt obligations, prompting global concern about its solvency and ultimately a $20 billion bailout from the UAE Central Bank and Abu Dhabi-emirate government that was refinanced in March 2014.
Dependence on oil, a large expatriate workforce, and growing inflation pressures are significant long-term challenges. The UAE's strategic plan for the next few years focuses on economic diversification and creating more job opportunities for nationals through improved education and increased private sector employment. (Source: Central Intelligence Agency)
Macro economy: The United Arab Emirates is the second largest economy in the Middle East, after Saudi Arabia. It is also the eighth largest oil producer globally and a constitutional federation of seven emirates: Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah and Fujairah. While oil has been a major contributor to government revenue, the country has been pursuing a policy of economic diversification. The strategy is to increase investment in industrial and other export-oriented sectors, including heavy industry, transport, petrochemicals, tourism, ICT, renewable energy, aviation and space, and oil and gas services.
Islamic economy: The UAE is ranked second in the Global Islamic Economy Indicator. The ranking evaluates quality of the overall Islamic economy ecosystem a country has relative to its size. The Emirates is second on the index with strong scores in Halal food, finance and travel. Currently, the UAE ranked third in the Global Islamic Finance Development Indicator. Several initiatives undertaken by the government to promote and develop the Islamic Economy combined with being one of the safest destinations in the Middle East for investments as well as a living makes UAE a prominent hub in the Islamic Economy.