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Diversifying economy of UAE

No doubt, United Arab Emirates commercial activity have a highest economic freedom in the Arab world. There is a wealth of opportunities to rise for UAE companies. These trading movement assists to reduce poverty in the country, generate further career opportunities and making workforce and credit easily available. The Central Bank of United Arab Emirates (UAE) revealed in the present statement that the UAE’s real growth registered 3.1 percent year-on-year (YoY) rise in the third quarter of 2018, driven by both oil and non-oil sectors, Real oil GDP rose 2.7 percent YoY basis in third quarter of 2018 while non-oil real GDP remained robust and growth reached at 3.3 percent YoY basis in same quarter 2018. The central bank also attributed recovery in growth momentum to federal stimulus package, measures related to granting visas to financiers and professionals and rise of private credit particularly to corporate sector.

It is said that the economy of the UAE is the second largest in the Middle East and the Emirates have been successfully diversifying its economy. Although the UAE has the most diversified economy in the Gulf Cooperation Council (GCC), its economy remains extremely reliant on petroleum products. With the exception of Dubai, most of the UAE is dependent on oil revenues. Petroleum and natural gas continue to play a central role in the economy, especially in Abu Dhabi. Statistics also show that the tourism is one of the bigger non-oil sources of revenue in the UAE, with some of the world’s most luxurious hotels being based in the UAE. A massive construction boom, an enlarging manufacturing base, and a thriving services sector are helping the UAE diversify its economy.

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According to the Central Bank’s Augmented Economic Composite Index (AECI), overall real GDP growth is expected to record 4.4 percent in fourth quarter of 2018 supported by a 6.7 percent growth in the oil sector, because of a production base effect and higher price levels, and a 3.4 percent rise in the non-oil sector in the same quarter. Accordingly, overall real GDP growth is expected to stand 2.8 percent during 2018 driven by a growth of 1.7 percent and 3.3 percent in the oil and non-oil sectors, respectively.

Moreover, the experts’ statistics also reviewed that growth projections for 2019 explain that economic activity would enhance in the non-oil sector because of predicted higher oil prices, more oil production, and the effects of the proclaimed fiscal stimulus packages, underpinned by the strong fundamentals. On the other hand, the remittances from the UAE in the third-quarter declined 4.3 percent or Dh1.9 billion to Dh41.4 billion as against to the corresponding period previous year. Personal remittances that were settled by the exchange houses registered Dh32.8 billion, a rise of 5.8 percent or Dh1.8 billion as against to the same period of 2017. While statistics also posted that the remittances sent through the banks declined from Dh12.2 billion third quarter of 2017 to Dh8.6 billion in third quarter of 2018, a decline of 30 percent. The experts also recorded that the most significant destination country for outward personal remittances during the period of July-September 2018 was recorded India, accounting for 35.7 percent of the total outflows, followed by Pakistan, Philippines, Egypt and United Kingdom (UK).

 

Official record shows that the Dubai property prices declined 7.4 percent YoY as against to the previous quarter with an average price of Dh12,804 square meter. The Central Bank also registered that the yearly drop in property prices in Abu Dhabi was registered 6.1 percent as the average price reached Dh11,476 square metre. The rental yield, which measures the rate of income return over the cost associated with an investment property, declined slightly in Dubai to 6.81 percent, also in Abu Dhabi by 0.1 percentage points to reach 6.77 percent. The quarterly report said that the Dubai market continues to exhibit fall in rent because of excess supply, relative to slower demand. The rent prices fell by a yearly rate of 9.6 percent in the third quarter of 2018, following a fall of 8.3 percent in the previous quarter.

The officials posted in a statement that the inflation which is very important indicators in any economy, increased by 3.6 percent YoY in the third quarter of 2018 as against to a 3.4 percent rise in Q2 2018. The level of inflation stayed higher than during 2017 because of the effects of VAT implementation and other excise taxes on tobacco and alcohol beverages that were launched by the end of 2017.

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According to the Fraser Institute’s Economic Freedom of the Arab World’s yearly statement 2018, the UAE tied with Bahrain for first place with a score of 8.0. Among the sub-indices, the UAE’s score for legal structure and security of property rights stayed 8.0 and retained its first place. The Emirates’ score for sound money rose to 9.5 from 9.4, leaving the UAE ninth place in the ranking, the same as last year. It is also sated in the report that the UAE came in first place in freedom to trade, up from second, with an enhanced score of 8.3 as against to 8.1 previous year.

For regulation of business, labor and credit, the UAE scored 7.6, but rose from fifth to third place in the rankings. According to the statement, economic freedom dramatically declines poverty. In the least free nations, over 30 percent of the population suffers extreme poverty – defined as $1.90 a day – and over 50 percent suffers moderate poverty – $3.20 a day. In the freest nations, 1.48 percent of the population suffers $1.90-a-day poverty and only 4.31 percent suffer $3.20-a-day poverty.

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