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UAE Economy: Signs of Dynamics and Diversity

Mehmood-Ul-Hassan Khan

Under the visionary leadership of UAE the economy is strong, stable and sustainable. Now, UAE is considered one of the advanced open-economy states in the world where golden principles of free market and fair competition principles really exist. Moreover, the UAE’s economy is the second largest in the Arab World. The country was ranked 14 out of 181 countries in the World Bank report on trade across borders. The UAE also ranked ahead in terms of technological readiness and innovation. The report ranked the UAE 6th, 9th, 10th, 21st and 25th in terms of infrastructure, institutions, market efficiency, competence and innovation respectively. The Index of Economic Freedom ranks the UAE as the 46th most economically free country higher than countries like France, Italy, Saudi Arabia, and China.

UAE Economic Report 2009

Sultan Bin Saeed Al Mansoori, UAE Minister of Economy, announced the UAE Economic Report 2009. It highlighted a growth in GDP of 1.3 per cent last year, with the non-oil sector contributing to 71.6 percent of the GDP which verifies the elements of dynamics and diversity in UAE economy. He said that the economy was set to achieve a growth in GDP of 3.2 percent in 2010. According to him, rational people, investment and business friendly industrial policies will drive sustainable development across the UAE. The real GDP growth for year 2010 is projected at 2.5 per cent.

Salient Features

The economic report 2009 further says that the GDP at current prices for 2009 is Dh914 billion and the GDP at constant prices was Dh514.5 billion. The minister said that the rate of inflation was 1.56 per cent, compared to 12.3 per cent in 2007-08, and has declined by 0.01 per cent at the end of the first quarter of 2010, compared to the same period in 2009. It is hope that the rate of inflation is projected to be controlled at 1.1 per cent by end-2010 and at 2 to 2.5 per cent by end-2011 as global economic recovery chances brighten.

Sign of rational decision making and healthy prospective outlook

Al Mansoori proudly explained that the economic Report 2009 is a key document and ready reference for decision makers in the UAE and the world too. The percentage of foreign trade to GDP reached 173 percent in 2009. The report indicates healthy and prospective outlook of the UAE economy in 2010. It also reflects the collective and coordinated result-oriented policies of the visionary leadership by which the nation has successfully managed and addressed the complicated challenges of the global economic recession and financial liquidity crisis. He stressed that emphasis on economic diversification and openness has contributed to an increase in the share of the non-oil sector to 71 per cent of the GDP compared to 66.5 per cent in 2008 which is indeed a healthy sign for UAE macro-economy.

High contribution of non-oil sector

The report further tells about the contribution of the various non-oil sectors. Manufacturing, construction, retail, real estate, financial services and tourism, played a significant part in the overall GDP of the UAE in 2009 and projections of 2010 are even better an d strong too. It is hope that the global economic recovery will further strengthen the performance of the non-oil sectors, and UAE’s expected GDP will be higher than that of other high-income industrialised nations in the region and around the world.

Political wisdom and commitment

The economic minister again assured that the visionary leadership and important decision makers in UAE are committed to strengthening the economic performance and enhance the integration of all key actors in line with the UAE Vision 2021 to make the UAE among the best countries in the world by 2021. Undoubtedly, UAE offers an exemplary economic example in its development of a competitive economy. It gives the necessary facilities to promote the culture of investments in the country. It further encourages the diversity in the macro-economy through concentrating on added value investments and industries, including the conventional and renewable energy sectors, primary industries, infrastructure, and financial and tourism services.

He further elaborated the key instruments of UAE Vision 2021 i.e. an ambitious and confident people who adhere to their heritage; a strong federation with common destiny; a competitive economy that is led by innovative and knowledgeable UAE nationals; and high quality life endowed with sustainable environment.

Details of exports

In the report the total exports and re-exports for the year 2009 was valued at Dh769.2 billion (US$ 209.6 billion); and export and re-export of oil products accounting for Dh256.5 billion (US$ 69.9 billion). The total imports were valued at Dh710.1 billion (US$193.5 billion).

The report shared that the non-oil exports were primarily destined to India, Switzerland, Qatar, the Kingdom of Saudi Arabia, Iran, Oman, Pakistan, Nigeria, Kuwait, and Iraq, representing about 73.4% of the total. Re-exports were primarily to Iran, India, Iraq, the Kingdom of Saudi Arabia, Qatar, Switzerland, Bahrain, Afghanistan, Hong-Kong, and Oman, representing about 64.5% of the total.

Banking and financial stability

Banking industry plays very important role in the socio-economic development of any country and UAE is not any exception. The Central Bank of UAE is continued to strengthen confidence in the domestic financial market. To overcome the liquidity crunch and dilute the global financial crisis the Central Bank of UAE arranged an Dh70 billion ($19 billion) liquidity facility. Bank deposits reached Dh950 billion ($259 billion) at the end of Q1 2009 compared to Dh840 billion ($229 billion) at the end of June 2009.

The governor of central bank of UAE, Sultan bin Nasser Al Suwaidi says that it hope that the domestic l banks in the UAE will return to making good profits despite uncertain economic conditions. It is hopeful that due to the local banks’ positive reception of the Dubai World debt proposal as well as strong cash reserves and capital would help the banking sector meet any necessary levels of provisioning.

Moreover, according to the Institute of International Finance (IIF) the UAE has the highest government shareholding in its banking sector in the Gulf region. The report indicates that the UAE has the largest banking system in the Arab World in terms of assets and shareholders equity, which stood at Dh1,523 billion and Dh254.7bn respectively at the end of April.

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