UAE enters new growth phase

DUBAI — The UAE is seeking to boost the share of the industry in its Dh1 trillion economy to 25 per cent in five years as part of a long-term strategy to reduce dependence on oil, a senior government official said in London on Wednesday.

By Issac John

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Published: Fri 22 Oct 2010, 12:11 AM

Last updated: Mon 6 Apr 2015, 11:43 AM

The current contribution of the UAE’S fast growing industrial sector to the nation’s gross domestic product, or GDP, is 16.2 per cent. “We are aiming to boost the contribution of industry to the overall economy to 25 per cent in the next five years,” Mohammed Al Shihhi, the UAE Economy Ministry’s Undersecretary, told reporters on the sidelines of an investment forum in London.

The UAE, the world’s third largest oil producer, has embarked on the major diversification drive to reduce dependence on oil which currently accounts for only 29 per cent of the country’s gross domestic product. The non-oil sector’s contribution to GDP touched 71 per cent for the first time in 2009 from 66.5 per cent in 2008.

Al Shihhi said the UAE economy is currently in a growth phase, having weathered the worst of a global economic crisis, with average real gross domestic product seen at 2.5 per cent this year.

“We have now entered the next phase of growth,” said Al Shihhi.

Earlier this month, the International Monetary Fund raised its 2010 growth forecast for the UAE to 2.4 per cent, from 1.3 per cent in May. It now sees the UAE’s economy expanding by 3.2 per cent in 2011.

According to Minister of Economy Sultan bin Saeed Al Mansouri, the country’s economic diversification policies have helped it to ride out the impact of the global financial crisis. The UAE’s focus on trade, tourism, service sectors, logistics, financial services and industries played a big role in achieving 1.3 per cent GDP growth last year.

As part of its greater focus on industries as future growth engine, the UAE has been spending billions on power, aluminium and petrochemicals plants.

Economist Intelligence Unit, or EIU, said in its latest forecast that the UAE economy was on track to hit an all-time high of Dh1 trillion in 2010 and would continue to grow further in 2011on the back of high oil prices.

The EIU’s real GDP growth forecast is close to a 2.5 per cent growth projected by UAE’s Ministry of Economy.

According to EIU, the UAE will grow 15 per cent to Dh1.15 trillion in 2011 as crude prices are expected to be higher than in 2010.

Standard Chartered Bank, in its Global Focus for the month of September, has said that UAE’s growth was underpinned by both the oil and non-oil sectors. “The oil sector makes up close to 30 per cent of the UAE economy. Higher oil prices and stable production should allow the oil sector to make a positive contribution to growth in 2010,” the bank said in its report.

“There is also positive news from the non-oil sectors of the economy. The trade sector is significant for Dubai, with the ‘trade and wholesale’ component making up close to 40 per cent of Dubai’s GDP. Official figures show that Dubai’s non-oil trade increased by 18 per cent year-on-year in first half 2010 to $76 billion,” it added.

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