Economic Diversification in the United Arab Emirates

With political stability in a boiling region, the United Arab Emirates (UAE) have shown some resilience to the decline in hydrocarbon prices, economic growth, although declining, amounting to 3% GDP. UAE GDP is dominated by economic power in Abu Dhabi (60%), including its hydrocarbon production and management of almost all of the savings. Dubai contributes up a quarter of GDP and is the commercial hub of the UAE, especially with its port and airport infrastructure. It is expected an acceleration of growth in the UAE in 2016, and the future of Expo 2020 is expected to boost the economy in the longer term.

 Economic diversification of the UAE

The soundness of the banking sector and rising tourism revenues helped reduce the impact of lower oil prices, reflecting the economic diversification of the UAE. However, since 2015, the UAE face a significant deficit resulting from the contraction of oil revenues. The authorities of Abu Dhabi, whose recipes were most initiated by low oil prices have prioritized investment projects while at Dubai activity will be stimulated by investments ahead of the Expo 2020 (extension of the metropolitan network). According to Development 2014-2016 three-year plan, the budget in 2016 (AED 48.5 billion, down slightly compared to 2015) allocates the majority of funds to social spending, giving priority to the sectors of education, health, and housing. The needs of citizens and infrastructure are essential to achieving the UAE Vision 2021. This decrease reflects the budget will cut spending in a context of declining oil revenues.

Abu Dhabi development

Despite the successful restructuring of the debts of Dubai, the specter of a new real estate bubble and flat overcapacity, Abu Dhabi development on economic diversification and development of alternative energy sources. Launching a nuclear fleet is planned for 2017, as well as massive investment in renewable energy with the project “Masdar” of about $22 billion. It remains to establish stricter supervision rules in the banking sector and real estate to avoid the cyclical crises. Aware of the exhaustible nature of oil resources, the UAE has launched a policy of economic diversification to reduce dependence on oil and ensure a fairer distribution of wealth. The strategy aims to exploit the complementarity between the emirates. While Abu Dhabi is leading to economic diversification, Dubai seeks above all to develop tourism.

The UAE has one of income per capita the highest in the world and the social security system is very protective. The UAE holds one of the lowest unemployment rates in the Middle East (4.5%) and depends heavily on foreign workers (over 85% of the workforce). A policy of “Emiratisation” was launched to promote the employment of nationals.


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