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

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

The United Arab Emirates registered subdued economic performance in recent years, partly due to cuts in oil output as part of OPEC agreements, continued corporate restructuring, reduced government investment and declining real estate prices. External factors also include a slowing global economy, geopolitical tensions, weaker energy demand and the COVID-19 pandemic. After contracting by an estimated -6.1% GDP in 2020, economic growth picked up in 2021 (2.2% GDP), supported by the UAE’s early and strong health response, continued supportive macroeconomic policies and a rebound in tourism and domestic activity related to the delayed Dubai Expo 2020 (IMF). Economic growth is expected to strengthen in 2022 and 2023 (3% GDP) thanks to a recovery in oil prices and production level. Regional tensions, potentially volatile oil prices and the Omicron variant are key risks to the outlook (Focus Economics).

In 2021, the UAE’s economy recovered from the deep but temporary recession triggered by the COVID-19 pandemic, lower oil prices and reduced oil production. The UAE promptly put in place supportive measures to mitigate the effects of the crisis, and continued its accommodative fiscal policy. The successful vaccination program boosted domestic consumption, and the construction and tourism sectors were stimulated by activity related to Dubai Expo 2020, held from October 2021 to March 2022. According to the IMF, the government net borrowing improved to -0.5% GDP in 2021 (from -5.6% in 2020) and is expected to further decrease to -0.2% and -0.1% in 2022 and 2023. The public debt is low but has increased rapidly in recent years, from 20.9% GDP in 2018 to 39.4% in 2020, according to IMF estimate. It decreased slightly in 2021 (37.3% GDP) and is forecast to remain under 40% GDP in 2022 (38.6%) and 2023 (38.9%). The public debt is expected to be funded mostly by tapping into the international capital markets (Coface), although the UAE’s Central Bank and sovereign wealth funds own important foreign assets, providing the country with a large liquidity cushion (Abu Dhabi holds world's fourth largest sovereign wealth fund) and making it a net creditor at global level. The deflation observed in 2020 (-2.1%) turned into a moderate inflation in 2021 (2%) which is forecast to remain stable in 2022 (2.2%) and 2023 (2.1%) (IMF). In the context of the ambitious ‘Project of the 50’ agenda, the government took a series of measures to improve competitiveness, attract investments, modernise and diversify its economy. Structural reforms are needed to move to a more environmentally sustainable growth model.

The UAE has one of the highest per capita income levels in the world and a highly developed welfare system. It also has one of the lowest rates of unemployment in the Middle East (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 employment of the local workforce. Nevertheless, unemployment rate among nationals continues to be considerably high compared to the rate among non-nationals (it varies according to emirate and is the highest in Abu Dhabi).

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 417.22e358.87e410.16427.93443.25
GDP (Constant Prices, Annual % Change) 3.4e-6.1e2.23.03.0
GDP per Capita (USD) 43,900e38,661e43,53844,75345,670
General Government Gross Debt (in % of GDP) 27.1e39.4e37.338.638.9
Inflation Rate (%) -1.9-2.1e0.23.72.8
Current Account (billions USD) 35.3711.06e39.6440.1138.95
Current Account (in % of GDP) 8.53.1e9.79.48.8

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

 

Main Sectors of Industry

According to the latest figures from the World Bank, agriculture contributes to 0.9% of GDP and employs a mere 1% of the workforce, as most of the country is unsuitable for agriculture and animal husbandry. Hence, around 85% of UAE's food is imported. Fishing and date-growing are among the main agricultural activities. This sector was the most resilient to the COVID-19 pandemic.

Manufacturing activities have seen an unprecedented growth in recent years, particularly in sectors such as metal processing, furniture, industrial preparation of food stuffs, aluminium production, construction materials, fertilisers, the petrochemical industry, fibreglass and real estate. Industry now comprises 40.9% of GDP and employs 34% of the workforce. The portion of GDP from oil and gas sector has declined gradually (30% of GDP according to latest estimates) owing to a successful economic diversification policy. The United Arab Emirates is the world's 8th largest oil producer with significant reserves. Its oil and gas reserves are estimated to last approximately 100 years at the current rate of consumption. Since 2020, this sector has suffered from the impacts of the COVID-19 pandemic, OPEC+ oil production cuts, lower oil prices, reduced global oil demand, and disruption in global supply chains (World Bank), but it is expected to recover in 2022.

The tertiary sector contributes 58.2% of GDP and employs 64% 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 GDP, mainly driven by the emirate of Dubai (UAE Official Portal). Due to the COVID-19 pandemic, this sector contracted in 2020, as tourism, international transport and trade decreased sharply. The lifting of lockdown measures and the Dubai Expo to be held from October 2021 to March 2022 are expected to stimulate the sector in 2022.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 1.4 34.2 64.4
Value Added (in % of GDP) 0.7 46.2 53.1
Value Added (Annual % Change) 2.7 2.1 1.2

Source: World Bank, Latest available data.

 

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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: MUHAMMAD bin Rashid Al-Nuhayan (since May 2022)
Prime Minister and Vice-President: MUHAMMAD BIN RASHID Al-Maktum (since January 2006)
Next Election Dates
Presidential: n/a
Federal National Council (FNC): October 2023
Current Political Context
The UAE has enjoyed a rather stable general political situation despite continuous tensions with Iran, Qatar blockade, the conflict in Yemen and the crisis in Lebanon (Coface). In 2019, despite ongoing disputes both at the UN and the WTO, the Emirati authorities eased a ban on the shipping of goods between the UAE and Qatar. After an embargo of three and a half years, diplomatic relations have been officially restored between Qatar, Saudi Arabia, the UAE, Bahrain and Egypt in January 2021. The UAE and Bahrain signed a peace agreement with Israel in September 2020, paving the way for reciprocal investments particularly in the energy, agri-food, tourism, and ICT sectors (Coface). Along with Egypt and Jordan, the UAE became the third Middle Eastern country to recognize Israel. Diplomatic relations were officially restored with Iran in December 2021.
Main Political Parties
There are no political parties in the UAE.
Type of State
Federation uniting seven emirates: 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

Source: World Press Freedom Index, Reporters Without Borders

 

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

COVID-19 epidemic evolution

To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in the United Arab Emirates please visit the Department of Health’s Covid-19 webpage and the National Emergency Crisis and Disasters Management Authority pages with the official data.
For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.

Sanitary measures

To find out about the latest public health situation in the United Arab Emirates and the current sanitary measures in vigour, please visit the website of the Ministry of Health and that of the National Emergency Crisis and Disasters Management Authority.

Travel restrictions

The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.

Import & export restrictions

For the up-to-date information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the website of Ministry of Economy. Further information is available in the section "Custom Measures" of KPMG's website.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to the UAE on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

For information on the economic recovery scheme put in place by the UAE government to address the impact of the COVID-19 pandemic on the economy, refer to the website of the Central Bank of the UAE and to the official governmental platform U.AE, which provides information about the measures taken by each Emirate.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the UAE government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to the UAE in the IMF's Policy Tracker platform
.

Support plan for businesses

For information on the local business support scheme established by the Emirates government to help small and medium-sized companies to deal with the economic impacts of the COVID-19 epidemic on their activity, the official governmental platform U.AE provides information about the measures taken by each Emirate. Further information can be found on the website for the National Program for SMEs.
For a general overview of international SME support policy responses to the COVID-19 outbreak 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.

Support plan for exporters

For the up-to-date information on possible support plans for exporters in the UAE, if applicable, please consult the website of the Ministry of Economy, as well as the official governmental platform U.AE.

 

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Latest Update: June 2022