Published On: 21-7-2018

• Country’s solid and diversified economy has successfully overcome ramifications of lower oil prices and weakened global demand for trade

• Foreign direct investment (FDI) inflows to the UAE increased by 7.8%, making it the largest FDI recipient in the MENA region and the GCC

• UAE’s FDI performance bucked the trend for 2017, with combined global FDI inflows decreasing by 23% to US$1.43 trillion

• UAE economic outlook is buoyed by an upswing in government spending on infrastructure projects as part of the preparations for Expo2020

• UAE scores highly in the Ease of Doing Business Index globally and leads the Index for MENA-region countries

Dubai, UAE: A new report from Dubai Chamber of Commerce and Industry (Dubai Chamber) has predicted prosperous years ahead for the UAE economy. The recently issued outlook document cites several factors to support these projections, chief among them being the emirate’s solid and diversified economy, which has softened the effects of both lower oil prices and weakened global demand for trade.

The report was rooted in data from prominent international research institutions, including Haver Analytics, Fox Economics, the United Nations Conference on Trade and Development (UNCTAD) and the International Monetary Fund (IMF). The statistics from these esteemed global organisations point to increased confidence in the UAE economy from international investors.

In addition to increased confidence, the UAE’s economic outlook is buoyed by an upswing in government spending on infrastructure projects as part of the preparations for Expo 2020 Dubai. The net result is expected to encourage the banking sector to increase credit activity in non-oil-related business, growing the local business community’s competitiveness and attractiveness to foreign investors.

Dubai Chamber’s report predicted that the UAE economy would return to long-term growth in 2018 and beyond, demonstrating that despite the dwindling oil prices witnessed since mid-2014, coupled with weaker global demand for trade, the UAE has successfully strengthened its global budget with relative spending cuts at the government level from 2015 onwards. This has been achieved most notably by revoking subsidies and introducing value added tax (VAT) as of January 2018 to diversify the government’s sources of income.

The report highlighted that the UAE economy bucked the downward trend affecting global markets in recent years and maintained its strong points, which have helped maintain the same rapid growth that was witnessed in the lead-up to the crash in oil prices. The report highlighted these strong points, which include a comprehensive, robust and stable economic environment; a business-friendly atmosphere; a solid, world-class infrastructure and a prime strategic location that has helped establish the country as an international centre for business, financial and maritime services.

In the below table, the report shows the relative stability of the UAE’s macroeconomic environment, as indicated by the increased cushion of international reserves since 2014, despite the decrease in international oil prices. The country had relatively low external-debt-to-GDP ratio with average of 60% over the period 2014-2016, yet it is expected to return to its average of 58% by 2018, which is relatively low by international standards. In addition, both UAE fiscal and the current account balances are improving significantly over the same period and are expected to improve further in 2018 and beyond. This is in part attributed to the UAE maintaining a business-friendly environment; it scores highly in the Ease of Doing Business Index globally and leads the Index for MENA-region countries.


Source: Dubai Chamber Research based on Haver Analytics

Sustained Positive FDI Inflows

According to the World Investment Report 2018, foreign direct investment (FDI) inflows to the UAE for 2017 increased to US$10.4 billion, registering an annual growth of approximately 7.8% and ranking the Emirates the as the 30th largest global recipient of FDI inflows and the largest recipient in the MENA region and GCC (Figure below) for last year. The UAE’s performance for 2017 bucked the trend, with the World Investment Report revealing that the combined global foreign direct investment (FDI) inflows decreased by 23% to US$1.43 trillion, despite the recovery in world GDP and trade.


Source: Dubai Chamber Research based on UNCTAD

Rebound in Global Trade

According to the latest IMF report on the world economy, global GDP growth strengthened to 3.8% in 2017, with a notable rebound in global trade. It was driven by an investment recovery in advanced economies, continued strong growth in emerging Asia and signs of recovery in several commodity exporters on the back of substantial gains in oil prices. In 2018 and 2019, global GDP is expected to grow to 3.9% supported by strong economic momentum, favourable market sentiment and the expected positive repercussions of an expansionary US fiscal policy.