United Arab Emirates: Economic and Political Overview

Economic Overview

The United Arab Emirates’ economy rebounded well from the COVID-19 crisis, growing 7.9% in 2022 and an estimated 3.4% in 2023, fueled by robust domestic activity. Forecasts for 2024 indicate a non-hydrocarbon GDP growth surpassing 4%, driven by the tourism, construction, and real estate sectors. Anticipated for 2024 is a 7% year-on-year increase in tourism receipts, reaching USD 43.7 billion (around 9% of the GDP). This surge is poised to further contribute to a rise in private consumption. Conversely, government consumption, accounting for approximately 12% of the GDP, will primarily focus on business reforms and incentives, rather than implementing stimulus programs to boost consumption. For the year as a whole, the IMF forecasts growth at 4%, followed by 4.2% in 2025.

The UAE’s public finances are sound. Supported by elevated oil prices, both fiscal and external surpluses maintain their strength. Projections for 2023 indicate a fiscal balance of around 5% of GDP, underpinned by robust economic activity and oil revenue. The gradual implementation of a corporate income tax, initiated in June 2023, is poised to contribute to increased non-oil revenue in the medium term. The consolidated UAE government debt-to-GDP ratio decreased to 29.4% of GDP in 2023 (from 31.1% one year earlier) and should follow a downward trend over the forecast horizon (28.3% by 2025). This decline is further influenced by the Dubai Emirate's commitment to reducing its public debt by EAD 29 billion in accordance with its Public Debt Sustainability Strategy. Simultaneously, the current account surplus is anticipated to surpass the medium-term level significantly in both 2023 and 2024. Nevertheless, the seven Emirates have varied debt profiles, with the Emirate of Dubai recording the highest level, at 78% 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 2023, inflationary pressures moderated gradually to reach 3.1%; albeit a further reduction is expected for 2024 (2.3% as per the IMF projections), increasing rental prices are expected to exert upward pressure on the housing component of the CPI basket. As a result, inflation is likely to remain above the average observed in 2020-2022, which hovered around 1.3%.

The UAE has one of the highest per capita income levels in the world (estimated at USD 88,962 in 2023 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 2.8% 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 0.8% of GDP and employs a mere 2% 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 90% of UAE's food is imported (USDA). Fishing and date-growing are among the main agricultural activities. Despite limited water resources, the UAE government continues to look for new technologies to support the local production of certain strategic commodities.

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 51.5% of GDP and employs 27% of the workforce. The portion of GDP from the oil and gas sector has declined gradually (to about 30%, according to the latest estimates) owing to a successful economic diversification policy. The United Arab Emirates is the world's 7th largest oil producer with significant reserves: its oil and gas reserves are estimated to last approximately 100 years at the current rate of consumption. “Operation 300bn”, a 10-year strategy developed by the Ministry of Industry and Advanced Technology (MoIAT), seeks to expand the contribution of the industrial sector from AED 133 billion to AED 300 billion by 2031. Manufacturing plays a significant role in the UAE's GDP, ranking as the third-largest sector by nominal GDP share. In 2022, manufacturing contributed nearly 10% to the overall nominal GDP of the UAE, with Dubai and Abu Dhabi showing slightly lower proportions at around 8.7% and 6%, respectively; whereas Emirates like RAK and Sharjah have substantial industrial activities.

The tertiary sector contributes 47.7% of the GDP and employs 71% 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 the 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 (for example, Dubai welcomed 12.45 million overnight visitors in Jan-Sep 2023, up 23% y/y and exceeding the previous record registered in 2019 of 12.08 million visitors). Lastly, the aviation sector has been the key driver of Dubai's GDP growth.

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

Abu Dhabi Securities Exchange
Dubai Financial Market (DFM)

Other Useful Resources

UAE business information portal

Main Online Newspapers

Emirates 24/7
Khaleej Times
The National

Economic Portals

Erutledge: Gulf Cooperation Council Economics

Political Outline

Current Political Leaders

President: Sheikh Mohamed bin Zayed Al Nahyan (since May 2022)
Prime Minister and Vice-President: Sheikh Mohammed bin Rashid Al Maktoum (since January 2006)

Next Election Dates

Presidential: n/a
Federal National Council (FNC): October 2027

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. In recent years, the UAE normalized its relations with Israel under the U.S.-brokered Abraham Accords, becoming the third Middle Eastern country to recognize the country along with Egypt and Jordan. Nevertheless, the conflict in Gaza may jeopardize the progress made in this sense. With regard to the Russia-Ukraine conflict, the UAE maintained its neutrality.
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. In March 2023, the leader of the UAE appointed his eldest son as the Crown Prince of Abu Dhabi, positioning him as the probable successor to the presidency of the Federation.
Among the most important political and economic decisions of 2023, was the introduction of a 9% corporate income tax rate, which became effective as of 1 June 2023. Finally, the UAE hosted the 28th United Nations Climate Change Conference (COP28) between November and December 2023, which 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.