The UAE is fast becoming one of the GCC’s most successful countries. While general perception attributes the budding nation’s wealth and development to the export of oil, a gradual transformation of the economy has been underway for a few years now. So how is it shaping up?
An ill omen
The GCC is world-famous for its oil exports, and for decades these countries have leaned heavily on the oil business to launch themselves into the greater international market. With the collapse of oil prices in 2014, when the price of a barrel dropped from around $115 in June 2014 to under 35$ in February 2016, GCC countries have had to reconsider their investments and over-reliance on oil. This wake-up call is what has led to reform initiatives such as Saudi Arabia’s Vision 2030, with the Kingdom diversifying its economy and developing other industries.
A glance at the horizon
Saudi Arabia’s Vision 2030 plan is still in its early stages, but we have already seen some recent reforms with the legalization of movie theaters in the country following a 35-year ban. In addition, new legislation was passed last year declaring that women will finally be able to drive in the country, a liberating move that will not only modernize the country, but also revitalize its workforce, as many more women become employed.
UAE, on the other hand, has had the better foresight, commencing their Dubai Vision 2021 early on in 2010 to secure and stabilize their economy, shifting the focus away from oil.
A stable and resilient economy
UAE is currently one of the least oil-reliant countries in the GCC, with Trading Economics revealing that 40% of current UAE exports come from oil and natural gas, the lowest oil investment in the region. The country also derives its revenue from investments in transportation and storage, travel, and tourism.
As for money coming into the country, Foreign Direct Investments play a significant role, as the UAE is the 9th largest FDA recipient in Asia, according to the 2017 Global Investment Report by UNCTAD. The advent of the World Expo 2020 is estimated to bring in foreign investments of between $100 and 150 billion towards sectors such as retail, real estate, tourism and education, according to market research company Research Konnection, bringing the UAE ever closer to their goal of a more diverse economy.
In fact, the Institute of International Finance notes that this gradual transition to a more flexible economic environment coupled with foreign investment has helped the UAE economy emerge healthy and functional through the tumultuous oil slump.
As of late, UAE investors seem to be on the rise, as a study by YouGov revealed that UAE citizens were the most likely to invest out of the other GCC citizens. 32% responded that they are likely to make a new investment at least every quarter. At the moment, investors’ eyes are set upon real estate, within and outside the UAE, as the study confirms that 75% of respondents have invested in real estate in their own country at least once before, thus making real estate the most popular investment option in the GCC. This comes as no surprise, as the Council is estimated to have $149 billion worth of projects this year, of which the UAE is contributing a third of, according to a Venture Onsite report.
Tourism is also set to generate a large portion of the country’s yearly income; the World Travel and Tourism Council has forecasted a 5% increase in travel and tourism revenue by the end of this year, totalling to $19.7 billion, a marked increase from the year before. They have an approximate 300% increase to $63.7 billion revenue by 2028, and a 10.6% representation out of the GDP total.
A promising future
All in all, the UAE has put its eggs in several baskets and is set to tackle the coming decade with a renewed sense of confidence. While the current sources of economic revenue are not bound to significantly change, there will be a marked decrease in the prevalence and over-reliance on the oil sector, and concurrently a boost to the other major industries.