United Arab Emirates Economy Facts
Since the early 1970s, the United Arab Emirates has evolved from a very poor area to one of the world’s richest countries. The change has been possible thanks to the oil, which was first found in Abu Dhabi in 1958. The emirate now owns just over 7 percent of the world’s known oil resources and about 4 percent of the natural gas reserves. But recent years’ investments in tourism, for example, are being jeopardized by major disruptions such as the corona pandemic.
The country has sought to broaden its economy to reduce oil dependency. The United Arab Emirates today has a well-developed economy with a large service sector, industries and little agriculture. Especially in Dubai, financial markets, trade and tourism are significant. The non-oil sector of the economy accounts for about two-thirds of gross domestic product (GDP).
- Countryaah.com: Major imports by United Arab Emirates, covering a full list of top products imported by the country and trade value for each product category.
The high oil prices a few years into the 2000s gave the emirate a strong injection with growth of 7-11 per cent annually. As oil prices fell in 2014, growth figures were revised down, although analysts felt that the country had good conditions to handle the situation given the varied economy. Before the corona crisis hit until 2020, with dramatically reduced oil demand, the IMF predicted that the emirate’s economy would grow by 2.5 percent during the year.
Since the late 1990s, the emirate has liberalized its economies and privatized certain activities. In 2019, a major step was taken to attract more foreign capital. Previously, foreign owners had to control a maximum of 49 percent of a company in the emirate; it was required to have an emirate partner as the majority owner. That rule has been abolished, a company should now be able to be wholly owned from abroad.
- Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including UAE which represents the country of United Arab Emirates. Check findjobdescriptions to learn more about United Arab Emirates.
In order for the federal state formation between the emirates to survive, oil money is constantly redistributed from the richer emirates to the poorer in the north via the federal budget. Rich Abu Dhabi accounts for 70-80 percent of the federal budget.
Prosperity is so high that citizens do not pay income tax. Before January 1, 2018, there was no VAT either, but then 5 percent VAT was introduced on goods and certain services. However, many goods are still heavily subsidized.
Dubai, whose oil assets are smaller than Abu Dhabi’s, has invested most heavily in developing alternative sources of income such as finance, commerce and real estate along with infrastructure expansion. However, aviation and tourism also lead, in pandemic times, to a vulnerable position.
The financial crisis of 2008-2009 temporarily slowed the good development as Dubai was hit by a debt and real estate crisis. However, already in 2010, exports and imports began to grow again. The recovery continued and a brightening began to be noticed in the property market as well. Housing prices rose again rapidly as large construction projects and infrastructure investments were planned. Experts warned of the risk of property speculation and price bubbles in the Dubai real estate sector, but the economy was less exposed than during the financial crisis. The construction sector had decreased in importance while other sectors became more important and the banking system was in better condition. However, the indebtedness of Dubai’s state-supported companies was still high despite the restructuring and repayment of debts.
The country is one of the world’s most bank-tight, with a large number of foreign banks and several stock exchanges. However, Dubai in particular is considered to be the center for smuggling and money laundering, as well as for informal money transfer. Pressures from several Western countries, in particular from the United States, for the United Arab Emirates to tighten control over financial markets are considered to have yielded certain results.
The UAE has several large investment funds. The Abu Dhabi Investment Authority is ultimately controlled by Sheikh Khalifa and is one of the world’s largest.
The country belongs to the founders of OPEC, the oil-exporting countries ‘organization, and it is also a member of OAPEC, the oil-exporting Arab countries’ organization. Like other monarchies in the area, the emirates are part of the GCC’s Gulf Cooperation Organization. (The organization also has a branch for military cooperation.)
Oil and oil products dominate exports, but in recent years non-oil-related exports have become more important. Dubai accounts for much of this trade. In Dubai’s free zones, a large part of transit consists of transit trade: large quantities of goods are imported for further export, without customs duties or fees. Most of the exports go to Japan, India and other countries in East and South Asia. The EU countries are also important trading partners, as is Iran.
Exports of aluminum to the United States constitute a small part of the volumes handled by US companies but are important to the Emirates. The Emirates is one of the United States’ largest trading partners in the Middle East, but the port company Dubai Ports World was forced in 2006 by the US Congress – for “security reasons” – to refrain from taking over six US major ports.
The United Arab Emirates has the largest port capacity in the region. All emirates except Ajman have their own port.
The country has an important position as transhipment site in the international flight network. Dubai’s major international airport is the largest in the world in terms of international air passengers, which has also provided charter tourism to the Emirates. In 2018, Dubai received nearly 16 million tourists, according to state statistics.
Some time before the last turn of the century, Dubai’s rulers declared that they wanted to create a leading center in the world for tourism, and ten years later there were 350 luxury hotels and around 35 huge shopping malls in the emirate. Abu Dhabi later followed. A number of artificial islands for housing and tourism have been built and the world’s tallest building, Burj Khalifa, was completed in 2009. Dubai has the world’s largest indoor ski slope in a shopping mall.
By 2020, when the corona crisis struck with full force against tourism and international transport, it appears likely that Abu Dhabi will once again be forced to cover Dubai’s losses. And that in a situation where oil revenues are also falling due to global demand. At the same time, the crisis on the human level risks becoming the greatest for the large number of Asian guest workers who lose their livelihood in the Emirates.
With the World Expo 2020 exhibition planned in Dubai, it has been hoped to attract 25 million visitors, but the global crisis will delay the event in the future. The exhibition is scheduled to open in October 2021 and last until March 2022.
In 2009, the government decided to build a 150-kilometer long railway network between all the emirates. The first phase, a freight line between the Shah gas field and the port of al-Ruways, has been completed. Continued expansion, which will also include passenger traffic and connect the Emirates with Saudi Arabia, has been delayed by falling oil revenues. The first stage in the world’s longest (seven miles) driverless metro was opened in Dubai in 2009. Abu Dhabi is also building a subway.
The road network is in good condition and is constantly improving, but traffic jams are common. A new highway was built in the mid-2010s between the Emirates and Saudi Arabia, with tunnels under the camel passage.
FACTS – FINANCE
GDP per person
US $ 43,005 (2018)
US $ 414 179 million (2018)
1.4 percent (2018)
Agriculture’s share of GDP
0.7 percent (2018)
Manufacturing industry’s share of GDP
8.9 percent (2018)
The service sector’s share of GDP
52.5 percent (2018)
-1.5 percent (2019)
Government debt’s share of GDP
19.1 percent (2018)
1 million US dollars
Commodity trade’s share of GDP
145 percent (2018)
Main export goods
oil, natural gas, fish, dates
Largest trading partner
Japan, India, Iran, China, USA (2012)