A great start to the landmark COP28, which the UAE is hosting at Dubai Expo, is an eloquent testimony to the nation’s future readiness and its growing international clout as one of the most advanced and forward-looking countries on the planet underpinned by a vibrant economy.
Over the past 52 years, the UAE has merged as the second-largest Arab economy and the most technologically advanced and innovative nation in the Middle East. The remarkable success Emirates Lunar Mission accomplished a few days before the UAE National Day in 2022 epitomises the trajectory of its transformative growth in the next 50 years when it will celebrate the UAE Centennial 2071.
Having accomplished all its ambitious goals by ranking first worldwide across several indicators, the country of 10 million people has set sights on becoming the “Best Country” in the world across several spheres as it leapfrogs technologically, economically, and socially.
A study by the Abu Dhabi-based Trends Research Advisory, titled “Human Capital Management in a Crisis-ridden World: How to Preserve and Develop Wealth in Light of Global Economic Challenges,” has revealed that the UAE maintained a top position in the international human development indices, thanks to constant development of public expenditure on education and healthcare, which contributed to elevating the quality of life as well as socio-economic wellbeing of the population. It has revealed that for decades the UAE has prioritised investments into education while its public expenditure on healthcare increased from 7.5 per cent in 2000 to 10.4 per cent in 2020, and its share of GDP increased from 1.6 per cent in 2000 to 3.4 per cent in 2020. These findings confirm the UAE’s dedication to improving quality of education and their successful efforts to provide continuous learning opportunities to all.
According to the latest World Bank Gulf Economic Update (GEU) report, the diversification and the development of non-oil sectors has a positive impact on the creation of employment opportunities across sectors and geographic regions within the GCC.
The UAE’s economy continues to grow, benefitting from strong domestic activity as its fiscal and external surpluses remain high on the back of high oil prices. The near-term outlook is positive but subject to elevated global risks and uncertainty, a staff team from the International Monetary Fund (IMF) has said.
The IMF team said the country’s on-hydrocarbon GDP growth is expected to exceed four per cent this year and to remain at a similar pace in 2024, driven by tourism, construction, and real estate-related developments.
“Social and business-friendly reforms and the UAE’s safe haven status continue to attract foreign inflows of capital and labor, underpinning growth and contributing to elevated real estate prices, particularly in high-end segments,” the IMF team said in a statement following the conclusion of the recent staff visit.
“Banks in the UAE are adequately capitalized overall, but continued close monitoring of financial stability risks is warranted. Maintaining a prudent overall fiscal stance amid higher oil revenue will help contain inflationary pressures. Structural reforms to support medium-term growth and a smooth energy transition should be continued,” he said.
The IMF team noted that consequent to Opec+ production cuts, hydrocarbon GDP growth is expected to slow in 2023, but to accelerate next year with the UAE’s 2024 Opec+ production quota increase. “Overall real GDP is expected to grow around 3.5 per cent this year. Average inflation will remain contained at around three per cent in 2023, down from 4.8 per cent in 2022.”
The UAE’s fiscal and external surpluses, the IMF team noted, remain high on the back of high oil prices. The fiscal balance is expected to be around five per cent of GDP in 2023, driven by oil revenue and strong economic activity. The phased introduction of a corporate income tax that began in June 2023 will support higher non-oil revenue over the medium term. Public debt is projected to continue to decline, falling firmly below 30 percent of GDP in 2023, including with the benefit of Dubai reducing its public debt by Dh29 billion in line with its Public Debt Sustainability Strategy. The current account surplus is expected to be notably above the medium-term level in 2023 and 2024.
The World Bank anticipates an increase in the UAE's current account balance to 12.4 per cent in 2023 and 11.8 per cent in 2024. The UAE is expected to achieve a surplus in the fiscal balance by 5.2 per cent in 2023 and 4.6 per cent in 2024.
The IMF experts noted that banks in the UAE are adequately capitalised and liquid overall. Profitability has increased with higher interest rates and overall credit continues to grow, although at a slower rate. “However, rising real estate prices and tighter financial conditions underscore the importance of continued close monitoring of financial stability.
Continued efforts to strengthen the macro-prudential and resolution and recovery frameworks, promote the effective management of non-performing loans, and advance the National AML/CFT Strategy and Action Plan are welcome.”
The UAE’s banking sector has been toeing the line in tandem with UAE Net Zero 2050 and the energy diversification strategy, launching sustainability frameworks and financing some of the biggest renewable projects, all the while fighting climate change with environmental campaigns and activities, a top official said.
Apart from financing, the banks in the Emirates have been adopting innovative technologies and embracing digitisation to reduce their carbon footprints by way of paperless transactions, improving energy efficiencies through “green buildings” retrofitting and smart facility management to conserve electricity, recycle waste and plastic, as well as monitoring to reduce their greenhouse gas emissions. Thus, contributing to the UN’s goals of building resilient infrastructure and fostering innovation.
According to the IMF, the overall economic outlook remains subject to heightened global uncertainty.
“A decline in oil demand and reduced global trade and tourism from slower global growth, higher-for-longer interest rates, tighter financial conditions, or geopolitical developments would weigh on growth and pressure fiscal and external balances. However, higher oil prices and healthy fiscal buffers help mitigate risks, while reform efforts pose upside risks to growth.”
The IMF’s end-of-the mission statement added that the UAE’s sustained reform efforts support medium-term growth and a smooth energy transition, but prioritization and sequencing remain key to ensure effective outcomes.
“Advancing a medium-term fiscal framework, underpinned by careful coordination of emirate-specific fiscal anchors and rules, would promote long-term sustainability, and help meet climate policy challenges. Ongoing efforts to boost private sector employment, further develop the domestic capital market, and leverage trade and investment in digital and green initiatives will further advance diversification and lift medium-term growth. Building on recent improvements in economic data collection, sharing, and dissemination will buttress these efforts.”
The UAE is one of the most competitive nations in the world. In IMD’s latest world competitiveness ranking, the UAE made it to the global top 10 when compared with 64 economies along 336 competitiveness criteria.
In its report, IMD noted that the UAE’s leaders continued to be visionaries in recognizing the importance of diversifying their economy so that it was not overly reliant on oil and gas, a sector mainly concentrated in Abu Dhabi. “They invested in technology, state-of-the-art infrastructure, and services. Now, in Dubai and beyond, we find a global hub of commerce, tourism, and innovation. Along with its economic diversification, the UAE’s impressive architecture and commitment to cultural diversity have captured the world’s attention.”
The Emirati government’s progressive policies have allowed diverse cultures to coexist peacefully, adding appeal for tourists and professionals. Recent government policies are making it easier for expatriates to retire in the UAE and facilitate family reunions, the IMD report said.
The IMD report lauded the proactive mindset of the business community. “Instead of waiting for opportunities to come their way, the UAE’s business leaders tend to adopt a proactive mindset. They actively seek ways to create opportunities and drive change to shape the future," the report said.
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