Global Investment House – UAE Economic & Strategic Outlook - Macroeconomic Profile-
Global expected in its report on Macroeconomic Profile on UAE for the economic growth to remain buoyant for both 2006 and 2007. GDP is estimated to grow by 14% for 2006 to reach AED553.4bn while in real terms the economy is estimated to record 9.7% growth rate. Oil sector is to record high growth, as oil production is expected increase steadily to 3.5mn b/d by 2011. On the other hand, non-oil sector will gain more support from the diversification strategy. We expect manufacturing and trade to continue growing at high rates, in turn keeping the overall economic growth strong.
United Arab Emirates (UAE) is a Middle Eastern country situated in the southeast of the Arabian Peninsula comprising seven emirates, namely; Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah, and Umm al-Quwain. Since 1973, the UAE has undergone a profound transformation and currently it has an open economy with a high per capita income, where tremendous growth in the last couple of years has boosted the per capita GDP to an all time high of US$28,147 in 2005 as compared with US$24,380 the year before. Within GCC countries, UAE has the second highest per capita GDP after Qatar. In general, UAE’s wealth is based on oil and gas output where the fortunes of the economy fluctuate with the prices of those commodities. However, non-oil sector has its major role in the economy especially for sectors as; tourism, manufacturing, real estate, financial services and trade.
The program of economic reform and liberalization will continue and may pick up pace, as a result of both the new ruler’s leadership and pressure from bodies such as the World Trade Organization. The government is expected to press forward with its broad reform agenda, with new commercial regulations likely to strengthen the position of foreign firms across the federation. Despite record high oil prices, the emirates of the UAE will focus their efforts on boosting non-oil growth. In this regard, the government will continue to promote a progressive economic agenda, built around economic diversification and enhancing the role of the private sector. Similarly, the government will take steps to further promote foreign investment, including the abolition of the sole agency law and regulations that restrict foreigners to minority stakes in local firms.
Dubai remained at the forefront of most new initiatives, and sought to accelerate its diversification process, compensating for the decline of its small oil industry by building on its emerging position as the region’s services hub. Within this plan, Dubai has started to develop high-class tourism and international finance sectors. In line with this, the Dubai International Financial Centre was announced, offering 100% foreign ownership, no tax, freehold land and office space. Moreover, a new stock market for regional companies and other initiatives were announced in DIFC. Dubai has also developed internet and media free zones, offering 100% foreign ownership, no tax office space for the worlds leading information, communication and media companies. Recent liberalization in the property market allowing non-citizens to buy freehold land has resulted in a major boom in the construction and real estate sectors.
Ras Al Khaima (RAK) too has been working to diversify its revenue sources. Thus, RAK’s government embarked on a plan to develop and upgrade the tourism and industry sectors. This was sought to be achieved through leveraging RAK’s diverse natural features and opening up the industrial sector for local as well as internatinoal investors. RAK’s construction activities got a further shot in the arm during the last few years thanks to the rising demand for residential properties, in addition to the growing infrastructure needs of the Emirate.
On the competition front, UAE continues to rank favorably when gauged by various indices of competitiveness and business climate indicators. This is reflected as per latest rankings contained in the Global Competitiveness Report 2006-07 issued by the World Economic Forum (WEF). According to the report UAE is among the most competitive countries in the world and a haven for businesses as it has consolidated its international and regional position in the Growth Competitiveness Index (GCI) for 2006. Out of 125 countries, UAE ranked 32nd in the world as per GCI. Regionally, UAE enjoys the second rank in the MENA countries as well as, it is the highest ranked in the gulf region.
On the regulatory front, restrictions on foreign investment in the country are getting progressively relaxed with the expansions of free zones. The country has been recently discussing amendments to the law of commercial agencies in order to comply with WTO regulations. The country is also expected to raise the current 49% ceiling on the stake that foreign companies can acquire in domestic companies. The change in laws on foreign ownership of real estate in emirates like Dubai, Abu Dhabi, Sharjah, and Ras Al Khaimah also signals the intent towards reaching the stage of being seamlessly integrated with the outside world.
Looking forward, we expect economic growth to remain buoyant for both 2006 and 2007. GDP is estimated to grow by 14% for 2006 to reach AED553.4bn while in real terms the economy is estimated to record 9.7% growth rate. Oil sector is to record high growth, as oil production is expected increase steadily to 3.5mn b/d by 2011. On the other hand, non-oil sector will gain more support from the diversification strategy. We expect manufacturing and trade to continue growing at high rates, in turn keeping the overall economic growth strong.
