UAE Economic Outlook 2018

UAE Economic Outlook 2018

In line with recovery in other parts of the region, UAE’s economy will continue to gain momentum in 2018, driven by an expanding non-oil sector, policy recalibration, and massive infrastructure investments.

As per IMF estimates, UAE is expected to double its GDP growth rate in 2018 to around 3.4%. A sizable part of the growth will emanate from capital Abu Dhabi that is expected to grow by 3.2% in 2018, substantially up from a near flat growth of 0.3% in 2017. The capital, which is home to 6% of the proven global oil reserves, will benefit from rise in oil export. Meanwhile, growth in Dubai will edge up by 0.2% to 3.5% in 2018.  The non-oil sector in both, Dubai and Abu Dhabi is expected to accelerate by 3%.

Government Initiatives

The prudent leadership will be the guiding light and continue to usher the economy towards increased diversification into non-oil sectors, sustainable growth, and human capital development. Consolidation in state run entities will continue to gain momentum alongside investment into state of the art infrastructure. The later will be aligned with UAE’s ambition of becoming a world class player in global tourism, retail, and supply chain industry- dimensions, where it already holds a strong international positioning.

Dubai, that has a formidable reputation for putting spectacular shows, is not keeping a stone unturned in its preparation for World Expo 2020, a world class event that closely follows Olympics and Soccer World cup. Not just the event will help UAE and Dubai feature on the world stage, but also boost the economy by up to 5%, once fully realized.

2018 will also be a landmark year for UAE, as the nation will implement 5% VAT from 1st January. This will open up alternate revenue channels for the government. It is estimated that tax proceed will amount to AED 20 billion (USD 5.45 billion) helping the government to further its objective of economic growth and diversification.

UAE – Key Performing Sectors / Industries

The entire MENA region is expected to grow by around 3.7% in 2018, slightly less than the global average, and much ahead of the advanced economies, that are expected to clock a growth rate of 2%- as per the IMF research. International investment from PE players, family offices, and individual investors will continue to pour into the region stemming out from healthy demographic dividend, recovering economy, and rising middle class.

As one of the most diversified and developed economy in the region, UAE will continue to hold prominent placement amongst international investors. UAE’s incredible positioning amongst global investors also results from its political stability, higher transparency, nearly non-existent crime rates and a very cosmopolitan society, where nationals from over 200 countries happily reside.

Going forward, sectors such as education, healthcare, retail, and tourism, which compliments a growing demography and rising economy, will ensure higher risk adjusted returns. In order to fill the existing knowledge and innovation void, the government is giving tremendous weightage to knowledge economy, human capital development, skill enhancement, and nurturing an innovation centric society.  It has earmarked 20.5% of the federal budget for education. Hence, investment in both K-12 as well as higher education can reap great returns in the foreseeable future.

Tourism in UAE continues to be the iron pillar of the economy- a reputation that it strongly guards without interruption, since the time of economic slowdown in 2008-09. With a tourist arrival of 16 million in 2016, Dubai holds 6th position in the list of top 10 most cities around the globe. Other cities such as Abu Dhabi and Sharajah are also extending investment into tourism and hospitality.

Potential growth opportunities can also be identified in UAE’s burgeoning manufacturing sector, where the PMI index averaged around 55- indicating robust optimism and potential returns for investors.

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