UAE prioritizes its economic diversification
The economic diversification of the United Arab Emirates (UAE) remains a priority of government policy, indicates a report by the World Trade Organization (WTO).
By way of preamble: The UAE is a federation of seven Emirates, namely Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Quwain. The powers related to policies, laws and administration are shared between the federal authorities and the Emirates.
Together, Abu Dhabi and Dubai account for more than 85% of the country’s gross domestic product (GDP).
At the same time, the oil and gas sector accounts for around 30% of the UAE’s GDP, 41% of government revenue and 26% of merchandise exports, excluding re-exports.
Therefore, the interest in economic diversification is explained.
Between 2016 and 2019, real GDP growth was between 1.2 and 3.4%, mainly driven by the non-oil sector.
UAE
GDP contracted 6.1% in 2020 due to the effects of the Covid-19 pandemic. That same year, hydrocarbon exports fell 36% as a result of the fall in global demand.
In 2020, the UAE recorded a negative inflation rate of 2.1%. To mitigate the economic impact of the pandemic, the authorities offered fiscal and monetary incentives, both at the federal level and for each Emirate. According to the WTO report, real GDP growth is forecast to reach 2.1% in 2021.
Immigrants in the United Arab Emirates make up more than 87% of the total population, and the economy relies heavily on foreign workers.
Over the past six years, the authorities carried out various schemes to attract and retain highly-skilled foreigners, for example by granting the long-term residence visa or citizenship to certain investors, highly-skilled professionals or VIPs. of culture.
On the other hand, the UAE dirham has been pegged to the US dollar since 1997.
The main objectives of the Central Bank under article 4 of the new Federal Law No. 14 of 2018 are «to maintain the stability of the national currency within the framework of the monetary system», «to contribute to the promotion and protection of the stability of the financial system of the State» and «guarantee prudent management of the Central Bank’s foreign exchange reserves».
