- January 1, 2020
- Posted by: Kalyan Banga
- Category: Others
UAE Economic Outlook 2020 & Future
The United Arab Emirates (UAE) can be fairly labelled a global phenomenon. The UAE’s oil production along with solid progress in other business sectors has catapulted the nation into one of the Middle East’s major economic capitals. The economy is expected to see strong momentum by 2020, with likely increased government spending coming in and also Abu Dhabi loosening its fiscal policy and removing subsidy cuts.
GDP (Gross Domestic Product) Growth
UAE being the 2nd largest economy amongst Arab nations, touched a GDP of Dh 1560 billion (US$ 425 billion) in 2019, a third of which comes from oil. As per International Monetary Fund (IMF), UAE’s GDP growth will accelerate to 2.5 per cent in 2020, from a relatively modest 1.6 per cent in 2019, supported by government and backed by a growing number of construction and infrastructure investments in the run-up to Expo 2020. The nation remains the major destination of FDI inflows in the region, drawing more than Dh 40 billion (US$ 11 billion) in 2019. Officials are highly optimistic about higher FDI inflows, setting a target of 5 per cent of GDP for 2021.
GDP Contribution by Sectors
Over the past two decades, UAE’s economic diversification process has led to rise of numerous non-oil sectors, such as manufacturing (12.6%), real estate (9.1%), construction (8.6%), transportation (7.3%), finance and insurance (6.4%), hospitality and restaurant (5.1%) etc. Additionally, the UAE has also started to see the rise of local manufacturing as a fresh source of economic development.
A flourishing services sector and an expanding manufacturing base are supporting UAE to diversify its economy while tourism continues as the major non-oil source of revenue. Countrywide, there is around Dh 1285 billion (US$ 350 billion) worth of ongoing construction projects. Another growth driver is the UAE’s F&B sector which in the medium-term would experience strong growth courtesy Expo 2020 and other global events lined up like the FIFA World Cup 2022. The sector has grown over 25% from 2014 to reach an estimated Dh 3.75 billion (US$ 13.79 billion) by 2019.
Initiatives to Boost Economy
A series of recent reforms and further rules will see UAE sustain its growth impetus to become a Dh 1835 billion (US$ 500 billion) economy in a few years’ time. The government’s nod to allow up to 100 per cent foreign ownership of some businesses operating in 13 key sectors viz. agriculture, e-commerce, entertainment, food services, hospitality, information & communications, logistics, manufacturing, renewable energy, space, transport etc is one such bold initiative.
UAE government has stressed that education will remain a priority and thus have allocated a large proportion to funding government schools and development projects. Also, a plan has been formalized that includes issuing regulations and targeting 20,000 job opportunities for people in strategic sectors over the next 3 years.
Over the next decade, UAE’s dedicated industrial zones will play a key role in attracting local and international investment for the industrial sector. The nation also strives to attract international businesses to launch pioneering projects in UAE and to develop strong collaboration with industrial businesses at local and international levels. Also, the nation is putting a lot of emphasis on the Small & Medium Enterprises (SME) segment (which contributes 42% towards Dubai’s overall employment) and expects homegrown businesses to play a key role in driving innovation by employing cutting-edge technologies within the industrial sector. The National Programme for Small and Medium Enterprises of the Ministry of Economy, recently made public its plan to stimulate and support the nation’s SME segment thereby encouraging entrepreneurship in 2020 and beyond, encircling specialised courses and training programmes for entrepreneurs.
Global Rankings – UAE Economic Performance
- UAE ranked 1st for Macro Economic Stability
- UAE ranked 2nd for ICT Adoption
- UAE ranked 2nd for Belt and Road Index
- UAE ranked 4th for Air Transport Infrastructure
- UAE ranked 5th on World Competitiveness Index
- UAE ranked 5th on Change Readiness Index
Future Government Plans
UAE plans to spend Dh 6 billion (US$ 1.65 billion) on key infrastructure projects across the nation, including government buildings and road networks. Also they are working on the Etihad Rail project, which will provide a momentous jump in land transport by 2021.
Creating and maintaining a sustainable and diversified economy is a component of Vision 2021 which states: UAE will benefit from a diversified and sustainable economy, flexible in adopting new economic models, and exploiting on global collaborations to guarantee long-term prosperity. Preparing a ‘Competitive Knowledge Economy’ is one of the key blocks of National Agenda consistent with Vision 2021. The Government is focusing on UAE becoming the touristic, commercial and economic capital for over 2 billion people.
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