United Arab Emirates: Economic and Political Overview

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. Nevertheless, the country returned to robust growth in 2022 (5.1% of GDP according to the IMF), led by a strong rebound in tourism, construction, and activity related to the Dubai World Expo, as well as higher oil production, with elevated oil prices supporting high surpluses in the fiscal and external balances. Domestic activity should support the economy in 2023, with growth forecast at 4.2% by the IMF. Non-hydrocarbon growth, in particular, should be around 4% and is expected to accelerate over the medium term with the implementation of ongoing reforms. For 2024, the IMF forecasts GDP growth at 3.9%.

The UAE’s public finances are sound. In 2022, higher oil prices contributed to an increase in government revenues (almost half of the total fiscal revenues derive from the hydrocarbon sector) and to an improved budget surplus estimated at 9.4% of GDP by Fitch Ratings. In light of the likely drop in oil prices, Fitch expects the surplus to narrow accordingly, to 4.4% in 2023 and 0.9% in 2024. The consolidated UAE government debt-to-GDP ratio decreased to 30.7% of GDP in 2022 (from 34.7% one year earlier) and should follow a downward trend over the forecast horizon (29%). Nevertheless, the seven Emirates have varied debt profiles, with the Emirate of Dubai recording the highest level, at 81% 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 line with global trends, inflation has risen to an average of 5.2% in 2022. The IMF expects inflationary pressures to moderate gradually to 3.6% this year and 2% in 2024. 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. The government also introduced a corporate income tax regime in 2022.

The UAE has one of the highest per capita income levels in the world (estimated at USD 77,272 in 2022 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 3.4% 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 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, with an agricultural area of only 390,000 ha (FAO). Hence, around 85% of UAE's food is imported. Fishing and date-growing are among the main agricultural activities.

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 47.5% of GDP and employs 34% of the workforce. The portion of GDP from the oil and gas sector has declined gradually (about 30% of GDP according to the 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. The sector suffered from the impacts of the COVID-19 pandemic; however, it rebounded strongly in 2022, thanks to the rise in global energy commodities.

The tertiary sector contributes 51.6% 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). 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 and in the first half of 2022 the tourism revenue of the United Arab Emirates surpassed USD 5 billion and attracted nearly 6 million visitors who spent 25 million hotel nights, reflecting a growth of 10% compared to the same period in 2019 (before the pandemic).

Source: World Bank, Latest data available.

Indicator of Economic Freedom

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

Score:

7.63/10

World Rank:

20/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

Sources of General Economic Information

Ministries

Ministry of Finance

Statistical Office

Federal Competitiveness and Statistics Authority

Central Bank

Central Bank of the United Arab Emirates

Stock Exchange

Nasdaq Dubai
Abu Dhabi Securities Exchange
Dubai Financial Market (DFM)

Other Useful Resources

UAE Interact business information

Main Online Newspapers

Emirates 24/7
Khaleej Times
The National

Economic Portals

Erutledge: Gulf Cooperation Council Economics

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 and Qatar, as well as the crisis in Lebanon and the conflict in Yemen (Houthi's launched a drone and a missile attack which they called "Operation Hurricane of Yemen" on Abu Dhabi in January 2022). In recent years, the UAE normalized its relations with Israel, becoming the third Middle Eastern country to recognize the country along with Egypt and Jordan. Furthermore, the UAE maintained its neutrality in the Russia-Ukraine conflict.
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. Among the most important political decisions of 2022, there was the introduction of a 9% corporate income tax rate, which became effective as of 1 January 2023. Finally, the UAE will host COP28 in November 2023, which will 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

World Rank:

131/180

Indicator of Political Freedom

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

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.