UAE ECONOMIC OUTLOOK BRIGHT - 2018

UAE ECONOMIC OUTLOOK BRIGHT – 2018

Dubai – UAE economy expects to perform well in 2018 amid gains in oil prices, country’s diversification drive and implementation of VAT (tax). The country’s Gross Domestic Product (GDP) is expected to cross 400 billion dollars in 2018 with a CAGR of near around 4 per cent rising from the moderate growth of 1.4 per cent in 2017.

UAE Expects to Double Economic Growth in 2018

2018 should start to show signs of uplift for UAE economy. This brightening outlook is mainly driven by the projected growth of the non-oil GDP in excess of 3.3 per cent compared to 3,1 percent estimated in 2017. Also, the partial recovery of the oil GDP will have a consequent impact on the overall economic growth of the country.

The oil prices are expected to increase from $55 per barrel to US$65per barrel, which will build confidence and enable UAE government to invest heavily into diversification and infrastructure development projects. The de-regulation of the oil prices is expected to make an even bigger contribution to the diversification of the economy enabling the government to drive additional investments into the non-oil sectors.

Economic Development Initiatives – UAE

The economic forecast of UAE in 2018 is consistent with the vision spelled out by the government. The UAE economy department is emphasizing on sustainable growth in 2018. According to the UAE Vision 2021, the economy of the country must be oriented toward sustainable development.

Abu Dhabi Economic Vision Plan 2030

Abu Dhabi Economic Vision Plan aims to create a diversified and sustainable economy by 2030 with the objective of reducing reliance on oil sector, focusing on knowledge-based industries, developing human resources and investing in infrastructure. These priorities are reflected, for instance, in the launch of the Innovation and Entrepreneurship Center Abu Dhabi along with many other government initiatives that are on track.

Dubai Plan 2021

The positive impact of Dubai Government’s choices and programmes such as Dubai Plan 2021, which focuses on becoming a Sustainable Smart City and a pivotal hub for global economy are expected to fuel GDP growth in 2018.Additionally, Dubai EXPO 2020 should contribute to growth in 2018 as the preparations for the event are gathering pace.

VAT Implementation

As part of economic diversification efforts, the introduction of value added tax (VAT) is likely to boost other non-oil revenue of UAE in 2018 but also in the coming years. The VAT will apply to a range of items like water, electricity, food, clothes, electronics, hotel reservations and so on. The introduction of tax was recommended by the IMF to gulf countries as a way to grow non-oil income and diversify from oil-based revenues.

UAE Major Sectors & Industries – 2018

In 2018, it is expected that the process of diversification will be consolidated. Investments are expected to mobilize in key sectorsand industries including sustainable energy, real estate& construction, healthcare, education, tourism (medical tourism) and manufacturing.

Education – Privatization will shape the education sector in 2018 with the number of private schools to maintain an annual growth rate of 5 per cent until 2020. The digital disruption and the use of Smart Technologies in classrooms are also foreseen in 2018. Public education on the other hand, is likely to continue growing in the coming year.

Research development – The UAE seeks to be among the world’s most innovative countries by 2021. The government also plans to develop Dubai into “an international hub for knowledge-based innovation and sustainable industrial activities”. To achieve this goal, the government announced an increase of US$190.6 billion in funding for R&D in the 2017 budget. UAE government expenditure in R&D is forecast to increase in 2018. In the same context, Dubai Electricity & Water Authority (DEWA) has approved a total budget of $7.1bn for 2018, compared to $6.6bn in 2017.

Healthcare – The UAE’s healthcare market is set to reach to more than AED103 billion ($28 billion) by 2021 – representing 60 percent growth over the next five years.The healthcare sector in the UAE is experiencing structural changes to adapt to the demands of a more health-conscious population, both local and international as UAE and especially Dubai aims to become the next Medical Tourism Hub in the region. The healthcare sector will be worth $18.6 billion by 2018, from a projected $14.6 billion in 2014.

Retail – UAE’s retail landscape is expected to grow at a rate of 3 per cent in 2018 compared to 4% projected for 2017.Analysts affirm the low rate of VAT 5 per cent will have a minimal impact on the sector performance. However, traditional retailers will face many challenges, provoked by the expansion of e-Commerce businesses.

Hospitality & Tourism – Tourism will play a key role in the growing economy of the UAE in 2018.Large investments in travel, tourism, leisure and hospitality sectors will continue to attract more visitors, in line with the country’sstrategy to welcome 20 million visitors within the 2020 horizon.The launch of the Louvre in Abu Dhabi and the development of Yas Islandare expected to help the intention to position the country as a cultural and leisure destination. The forecasts for the hospitality industry in the United Arab Emirates project a growth rate of 5.3 percent for 2018, compared with 3, 2 per cent in 2017.

Real Estate – The real estate sector is also estimated to grow by 3.8 per cent in 2018. However, experts say that the UAE property market face a potential under-performance in 2018 due to the recent introduction of 5 per cent value added tax (VAT) and supply over powering the demand.

UAE – Destination of Choice for Foreign Direct Investment

UAE will continue to remain an attractive investment destination because of its diversified and innovation driven economy. In 2017-18 Global Competitiveness Report published by World Economic Forum, UAE topped the Arab World and ranked 17^th globally in the global competitiveness ranking. The UAE is well on the way to attract more than $70 billion (Dh257 billion) in industrial investments by 2025. While there are many positive investment programmes underway, VAT is likely to increase the costs of doing business in the country. Nonetheless, UAE is firmly on course to be the best performers in the Middle East over the next five years, thanks to its vibrant economy, ever expanding population base (9.5 Million – 2017-18) and influx of tourists that drives various sectors of the economy.

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