Economic and Political Overview

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

In this page: Economic Outline | Political Outline | COVID-19 Country Response

 

Economic Outline

Economic Overview

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) 507.06509.18536.83561.16588.64
GDP (Constant Prices, Annual % Change) 7.93.44.04.24.3
GDP per Capita (USD) 51,40050,60252,40753,81355,450
General Government Gross Debt (in % of GDP) 31.129.428.728.327.8
Inflation Rate (%) n/a3.12.32.02.0
Current Account (billions USD) 59.5541.5741.2541.9842.23
Current Account (in % of GDP) 11.78.27.77.57.2

Source: IMF – World Economic Outlook Database, Latest data available.

Note : (E) Estimated data

 

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 data available.

 

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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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Political Outline

Current Political Leaders
President: Sheikh Mohamed bin Zayed Al Nahyan (since May 2022)
Prime Minister and Vice-President: Sheikh Mohammed bin Rashid Al Maktoum (since January 2006)
Next Election Dates
Presidential: n/a
Federal National Council (FNC): October 2027
Current Political Context
The UAE has enjoyed a rather stable general political situation despite continuous tensions with Iran and Qatar, as well as the crisis in Lebanon and the conflict in Yemen. In recent years, the UAE normalized its relations with Israel under the U.S.-brokered Abraham Accords, becoming the third Middle Eastern country to recognize the country along with Egypt and Jordan. Nevertheless, the conflict in Gaza may jeopardize the progress made in this sense. With regard to the Russia-Ukraine conflict, the UAE maintained its neutrality.
Following the death of Khalifa bin Zayed Al Nahyan, his half-brother Mohammed bin Zayed Al Nahyan has been officially nominated president of the UAE after ruling de facto the country since his brother suffered a stroke in 2014. In March 2023, the leader of the UAE appointed his eldest son as the Crown Prince of Abu Dhabi, positioning him as the probable successor to the presidency of the Federation.
Among the most important political and economic decisions of 2023, was the introduction of a 9% corporate income tax rate, which became effective as of 1 June 2023. Finally, the UAE hosted the 28th United Nations Climate Change Conference (COP28) between November and December 2023, which put the country in the world’s focus.
Main Political Parties
There are no political parties in the UAE.
Type of State
Federation uniting seven emirates (monarchies): Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah and Umm al-Qaiwain.
Executive Power
Each Emirate is governed by an Emir and has its own administration. Every Emir manages his Emirate's resources autonomously.
The Federal Supreme Council, composed of the 7 emirate rulers, is the highest authority of the UAE and holds legislative and executive powers. The Emir of Abu Dhabi, the biggest oil producing Emirate, was elected President of the UAE in 2004, succeeding his father. The Emir of Dubai has been nominated Vice-President and Prime Minister.
Legislative Power
There is only one Chamber: the Federal National Council. It consists of 40 members of which 20 are appointed by the rulers of the seven Emirates, and 20 are indirectly elected, whereby each Emirate has a number of representatives equivalent to its demographic weight. Their mandate is for four years. This council has only consultative functions.
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
131/180
 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Not Free
Political Freedom:
7/7
Civil Liberties:
6/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For the general overview of the key economic policy responses to the COVID-19 pandemic (fiscal, monetary and macroeconomic) undertaken by the government of the United Arab Emirates, please consult the country's dedicated section in the IMF’s Policy Tracker platform.
Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, 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.

 

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Latest Update: February 2024