UAE Economy Reduces Reliance on Oil for Growth
Approaching the halfway point of 2017, it seems that the Emirati economy is growing at a steady pace. The International Monetary Fund (IMF) expects economic growth for the UAE to be a modest 1.5% for 2017. Other sources expect the economy as a whole to grow by more than twice that amount, but non-oil sectors seem to be the driving force.
In recent years, businesses and authorities alike have been striving to make the country known for more than just being a major exporter of crude oil. Fluctuations in oil prices have caused more than a little uncertainty, holding back growth in the process.
However, developments in and around Abu Dhabi and Dubai have helped to gradually change the face of the area, making the UAE attractive to investors and visitors for a variety of reasons. Attempts to diversify the economy are beginning to bear fruit.
One major engineer of non-oil growth is tourism. The UAE is already home to attractions such as Dubai’s Palm Jumeirah hotel complex, whilst major events in sports such as golf, Formula One racing and football are driving up visitor numbers to the country.
Developers are capitalising on the UAE’s burgeoning reputation as a destination for tourists all over the world. One recent example is a Dh6.3 billion family destination, comprising of a theme park, hotels and restaurants. Once completed, the Marsa El Arab complex is expected to add further fuel to local economic growth.
Tourism currently accounts for just a small fraction of the country’s GDP, with Abu Dhabi and Dubai making up the majority of income. Other sectors are, however, helping to diversify the Emirati economy further, technology being just one of them.
Technology is another area in which the UAE is hoping to lead the way. Tech firms have sprung up all over the country and are another contributing factor to non-oil growth so far this year. From forex brokers in Dubai to funding for tech startups in Abu Dhabi, the move away from oil to more sustainable sources of income is gathering pace.
In response to recent news about the recovery in the UAE’s economy, the markets have responded less than favourably. From the start of 2017, the Dubai Financial Market General Index (DFMGI) has dropped from 3538.68 points to 3376.75 at the close of trading yesterday. This equates to a fall of 4.6%, owing largely to the price of oil.
The Abu Dhabi Securities Market General Index (ADX), however, has risen slightly from the start of the year. It closed yesterday at 4582.07, rising by 48.2 points over the course of the year, at just over 1%. There is a sense of cautious optimism, which is down to more than just non-oil growth.
The budget deficit for the UAE has gradually decreased over the last few months. This is giving both private and state-run enterprises reason to loosen their purse strings. As it stands, the deficit is around 4.5% of GDP, becoming far more manageable than anticipated. Time will tell whether or not it will continue to fall.