UAE Economy: History & Future Forecasts

UAE Economy: History & Future Forecasts

UAE Economy History

The United Arab Emirates (UAE) has experienced significant economic growth and development over time. Here is a synopsis of the UAE's economic development:

Prior to Oil: The region's economy relied heavily on fishing, pearling, and commerce until oil was discovered in the UAE. The economies of the seven emirates that make up the UAE were very tiny and dispersed. Each emirate was in charge of its own economy until the United Arab Emirates gained independence from the United Kingdom and were unified in 1971. Before the creation of Japanese cultivated pearls and the finding of commercial amounts of oil, pearl diving, sailing, and fishing combined formed the foundation of the economy.

With a gross domestic product (GDP) of US$414 billion (AED 1.52 trillion) in 2018, the UAE has the second-largest economy in the Arab world (after Saudi Arabia).  The GDP is made up of a third of oil earnings. In 2013, economic growth was projected to be 4–4.5%, up from 2.3–3.5% during the preceding five years. UAE's GDP has expanded about 231 times since gaining independence in 1971, reaching AED1.45 trillion in 2013. The non-oil trade increased by around 28 times between 1981 and 2012, reaching AED1.2 trillion.

What Are the Most Important Sectors of the UAE Economy?

The UAE economy is made up of a number of significant industries that support its expansion and diversification on the whole. Some of the important sectors include:

Energy Sector

The UAE is renowned for its large reserves of gas and oil. The UAE economy has always been supported by the energy sector, especially the oil industry. In oil discovery, production, refinement, and export, the nation has invested heavily. The UAE has recently concentrated on diversifying its energy mix through advancing renewable energy sources.

Tourism Sector

Cities like Dubai and Abu Dhabi provide opulent hotels, top-notch shopping centers, recognizable monuments, and entertainment venues. The UAE's economy depends heavily on tourism, which helps with job generation, infrastructure improvement, and economic expansion.

The travel and tourism industry contributed roughly AED 180.4 billion, or 11.6% of the UAE's total GDP, to the country's GDP in 2019. The total amount spent by visitors from outside the UAE in 2019 was AED 143.1 billion. 2020 saw a growth in the number of hotels in the UAE, which now has 1,089 total and a 180,000-room capacity.

Real Estate Sector

The growth of residences, companies, and properties with mixed uses has greatly boosted the UAE real estate market. In huge cities like Dubai and Abu Dhabi, iconic buildings, affluent residential neighborhoods, and expansive infrastructure projects have developed. Real estate has had a significant positive impact on the economy of the UAE and attracts both local and foreign investment.

Over the past ten years, the real estate market in the United Arab Emirates has grown significantly. The UAE's real estate firms have a combined brand worth of $2.7 billion as of 2019, which put them third in the world behind China and the US. With assets of approximately $43.4 billion, the Abu Dhabi Investment Authority (ADIA), a significant international real estate investor, is based in the United Arab Emirates.

Industry Sector

Manufacturing, construction, and heavy industries have all grown to be significant components of the UAE's industrial sector. The nation has made investments in industries including petrochemicals, steel, aluminum, and aircraft. The industrial sector supports economic diversification, technological transfer, and employment development.

The industry sector is a fundamental pillar of economic expansion and a catalyst for trade and commerce thanks to the export of products made locally. The UAE launched Operation 300 Billion in March 2021, an ambitious 10-year program that aims to increase the industrial sector's contributions to the economy as part of its drive to diversify its economy and in recognition of the strong potential of the industrial sector to drive its diversification objectives. By 2031, the strategy projects that the industrial sector would contribute AED 300 billion to the GDP, more than tripling the economic impact of both the light and heavy industrial manufacturing sectors.

Technology Sector

The UAE has actively pushed for a knowledge-based economy, which has fueled the expansion of the technology industry. The nation has made investments in innovation clusters, research and development, and infrastructure. The UAE wants to establish itself as a leading worldwide center for artificial intelligence, digital transformation, and technology companies.

Trade Sector

The UAE has established itself as a significant regional commercial center thanks to its advantageous position. It boasts an extensive network of ports and airports, as well as a strong logistics and transportation system. The nation attracts foreign companies and promotes trade activity by providing a welcoming business climate, tax breaks, and free trade zones.

How Has the UAE Economy Developed in Recent Years in Terms of:

Labor Force and Average Wages

The UAE has experienced a steady increase in its labor force. The growth has been driven by both the influx of expatriate workers seeking employment opportunities and the UAE government's efforts to attract skilled professionals. The country has been investing in various sectors, including construction, tourism, finance, and technology, leading to an increased demand for labor.

The UAE has long had a graded wage system with differences in pay based on work type, skill level, and nationality, among other considerations. Numerous variables, including the industry of employment, experience, education, and demand-supply dynamics, have an impact on average earnings in the UAE. In comparison to other businesses, some, including banking, technology, and specialized industries, often provide greater average earnings.

The UAE government has adopted a number of labor market changes intended to improve worker protection and rights. The implementation of labor regulations to control employment contracts, working hours, yearly leave, end-of-service rewards, and occupational safety requirements is one of these reforms. These changes are made to enhance the general welfare of the workforce and working circumstances.

The Unemployment

The UAE has made a concerted effort to diversify its economy and lessen its reliance on the oil industry. New job possibilities have been created as a result of this diversification in industries including tourism, banking, technology, healthcare, and renewable energy. The government's emphasis on expanding non-oil industries has assisted in absorbing labor and lowering unemployment rates.

In order to create jobs, the UAE has promoted entrepreneurship and the expansion of small and medium-sized businesses (SMEs). The government has enacted legislation that is beneficial to business, expedited the registration process, and offered fledgling companies funding and mentorship programs. These programs have helped to create jobs by fostering a thriving business ecosystem.

To protect employees' rights and improve the working environment generally, the UAE government has adopted labor market reforms. The implementation of labor laws that regulate employment contracts, working hours, yearly leave, end-of-service rewards, and occupational safety requirements is one of these reforms. The goal of these changes is to establish a just and beneficial labor market that draws and keeps talent.

Gross Domestic Product (GDP)

In recent years, the UAE's economy has experienced consistent GDP growth. Through the promotion of non-oil industries, the nation has worked to diversify its economy and lessen its dependency on oil. The rise of tourism, significant infrastructure projects, and investments in several industries have all boosted GDP. It's crucial to keep in mind that particular GDP estimates might change from year to year, thus it is advised to consult official reports and data from the UAE government or other pertinent authorities for the most precise and recent information.

GDP Per Capita

The UAE has maintained a high GDP per capita over time, which reflects the total prosperity of the nation. The UAE has a higher GDP per capita since its population is relatively tiny compared to its economic production. The nation's high GDP per capita is a result of its emphasis on creating a variety of sectors, luring international investment, and fostering an advantageous business climate. However, over time, GDP per capita estimates may alter due to changes in the population and economic performance.

Foreign Investment

The UAE has been successful in garnering large foreign investments in recent years. The government has implemented a number of programs and initiatives to promote a hospitable business environment, including tax incentives, free zones, and reduced regulations.

Read more about investment in Dubai for freigners.

Future Forecasts for the Dubai Economy

• UAE Centennial 2071

The UAE Centennial 2071 initiative was introduced in 2017 by HH Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, as a plan to make the UAE the best nation in the world by the time it celebrates its 100th anniversary. A future-focused government, great education, a diversified knowledge-based economy, and a contented and united community are the four main pillars on which the Centennial is built. The UAE seeks to become a worldwide center for attracting the finest minds, ideas, and talent while also providing the best business prospects, a stable environment, and cutting-edge infrastructure. This is done under the axis "the best economy in the world."

• The Fifty Economic Plan – Roadmap to the Future

In December 2019, the UAE's Ministry of Economy unveiled the Fifty Economic Plan to create a future-oriented economy. This acts as a road plan for economic endeavors during the ensuing decades as part of the "Towards the Next 50" strategy. The five main pillars of the plan are the integrated economy, small and medium-sized enterprises (SMEs), tourism, foreign direct investment and exports, and luring and keeping talent. By fostering a thriving local business climate and empowering UAE enterprises to succeed and lead globally, the strategy seeks to accomplish a quantum leap in the national economy by the year 2030 and boost GDP growth. Sectors like space technology and digital entertainment, combined with the opening of new markets and the creation of a progressive legal environment that supports economic objectives, are the foundation of this future-oriented economy. The Ministry is also promoting increased business accessibility, assisting small family firms, and safeguarding and encouraging investment.

Edited by Imtilak Global ©

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