Sustainable Economic Diversification

  • 25 April 2016

The UAE economy has been one of the least affected by the current slump in international oil prices. The resilience of the UAE economy can be ascribed to the development policy that has been long adopted by the country to diversify sources of revenue and develop non-oil sectors.

Features of this policy are manifested in all future strategies and visions that are adopted by the federal and local governments. The underlying aim is to strengthen non-oil sectors of the economy, notably infrastructure, tourism, information technology, financial services, banking, industry and renewable energies, in tandem with developing national human resources to be able to contribute to their country’s progress and achievements.

As a result of these efforts, the UAE economy has become one of the most stable and balanced economies that remain resilient to external challenges, be they international economic pressures, the steep fall in international oil prices, or the political and security risks that are affecting the economies of Middle Eastern countries. These external factors have had an indirect impact on the economic conditions of the region as a whole and took their toll on the attractiveness of the region to foreign investments. Despite this unfavorable regional context, the UAE economy managed to stand out with an exceptional economic performance. A report by the Institute of International Finance expects the UAE economy to post a 3% growth rate this year, which is a reassuring percentage in light of the challenging economic climate.

The same report points out to a set of indicators for a positive performance of the UAE economy. The report highlights that this positive performance was driven by the growth of the non-oil sector, thanks to economic diversity, infrastructure quality, political stability and the performance of the financial, banking and insurance services, besides the enormous foreign assets of the UAE.

The report draws an optimistic future outlook for the UAE economy, saying that it will continue to post positive growth rate for the upcoming years despite the slump in oil price, thanks to the political and financial policies adopted by the state which enable the implementation of financial reforms to maintain the growth momentum. The Institute of International Finance also pointed out to the measures taken to liberate the price of fuel and reduce spending.

These considerations leave no doubt that the UAE is reaping the benefits of the economic and development policies it adopted decades ago. The expanding returns of the non-oil sector are able to boost domestically-driven growth and boost the economy in general despite the situation in oil markets. The policies and initiatives aiming at economic diversification also enabled the UAE to forge ahead in preparation for the post-oil era on the path of sustainable development and building an advanced knowledge-based economy that is resilient to crises.