The UAE Economy and its Global Role
- 10 October 2015
It means a lot when International Monetary Fund (IMF) affirms, in its recent report, that the current growth of the UAE economy is twice that of Eurozone economies. The positive aspect of this is not just the growth – estimated by IMF at about 3 percent outperforming that of Eurozone economies estimated at 1.5 percent – in terms of just growth figures. It carries much greater significance considering the state of the global economy and its fragility.
The world is living in a chronic state of financial and monetary instability with increasing signs of slowdown in many countries and economic blocs. This includes the emerging economies, which have been major driver of growth in recent times and were expected to lead global recovery. The UAE, on the other hand, has been steadily progressing on the path of growth and prosperity. In achieving this performance, the UAE has relied on indigenous factors enabling it to retain financial and monetary stability and putting it in a unique position.
The UAE’s achievement is significant due to an exceptionally downward trend in international oil prices, which have dropped 60 percent off their highs. Since the UAE is a major oil producer and exporter, this decline poses real challenge. By reducing its dependence on oil in recent decades, and expanding its industrial base to non-oil sectors, the UAE has managed to retain positive growth despite declining oil prices. Its trade balance has not suffered a deficit and IMF estimates that it will achieve a surplus of 2.9 percent of GDP this year and rise to 3.1 percent next year.
The Economic Intelligence Unit recently affirmed the UAE’s positive credit rating and confirmed the stability of the overall growth levels of its economy, especially in the non-oil sectors. It said that non-oil sectors have benefited from the government efforts to expand production base by reducing its dependence on oil. These developments mean that the UAE economy today occupies an exceptional position, compared to major advanced economies.
This has been achieved due to a number of factors not limited to indigenous growth or strong financial and monetary foundations, burgeoning non-oil sectors, or even due to the UAE being a major producer of energy. The country possesses all these factors. But it also has an ambitious leadership and follows balanced policies, with openness to the outside world, which gives it the capacity to progress further and assume greater role in the global economy.