Exceptional Performance of the UAE’s Economy
- 11 October 2014
Outlining the stable performance of the UAE’s economy and the fragile and unstable state of global economy International Monetary Fund (IMF)’s recent report estimates that the country’s economy will grow by 4.35 percent this year and reach 4.5 percent next year. The IMF estimates that the growth of global economy as whole would not exceed 3.35 percent this year and will likely decrease to around 3 percent next year. These indicators suggest that while the UAE economic performance is on an upward trajectory, global economy is declining.
The UAE’s remarkable performance despite the turbulence around the world can be attributed to the following reasons. First, it shows the robust foundations of the UAE economy where non-oil sectors are serving as the main engines of economic growth and have achieved growth of 6 percent. This trend has dominated the UAE’s economic scene in recent years, increasing the share of non-oil sectors in the GDP to about 70 percent. In a recent report, Institute of International Finance said that the UAE is one of the few oil exporting countries which has can withstand oil price volatility. It even described the UAE as the most capable country in the GCC to achieve this.
Second, prudent financial and economic policies have helped the UAE shield its economy against the effect of external crises over the years as it has wisely invested its oil revenue. The country has focused on non-oil sectors, expanding investments in infrastructure projects, renewable energy, tourism, transportation, logistics, trade, financial and banking services. The UAE has also relied heavily on expanding government spending, which has played an important role during financial crises. It also continues to make conditions favorable for foreign investments into various sectors. These factors have made the UAE economy resilient and have helped it grow compared to most economies around the world.
Third, the UAE economy has not suffered from internal pressures, especially with regard to inflation. This has allowed the government to stimulate the economy to grow without concerns. The UAE’s rate of inflation remains within safe limits. Even though it has been relatively high in recent years, according to IMF estimates, it has not crossed 2.2 percent yet. The UAE economy is also characterized by its levels of unemployment. The Arab Monetary Fund estimates that unemployment is not more than 4.2 percent in the UAE while ILO estimates it to be around 11.5 percent in the Arab world, and an average of 6 percent globally.