UAE’s diversified economy softens the blow of global trade worries and lower oil prices.

A new report from the Dubai Chamber of Commerce and Industry reveals that we’re about to step into a prosperous period for the UAE economy.

With the threat of lower oil prices and a diminishing global demand for trade, a solid and diversified economy has enabled the region to not just ride out the storm, but to succeed in areas where others have not.

Government input

With Expo 2020 Dubai looming closer, the UAE government has made preparations including an increased spend on infrastructure projects – strengthening confidence in the region. The banking sector is expected to increase its credit activity in the country’s non-oil related businesses, leading to increased competitiveness and therefore making it even more attractive to foreign investors.

The report also reveals interesting comment on the long-term status of the UAE economy. It predicted that long-term growth will return in 2018 and continue thereafter; which is attributed to relative spending cuts from the government between 2015 and 2018. Most notably, this has been achieved by the government diversifying its income sources by revoking subsidies and implementing value-added tax (VAT) in January 2018.

A hub for business

Many global markets have been following a downward trend in recent years; though the report highlights how the UAE economy has followed its own path.

A contributing factor to its success is that its business-first atmosphere has caused it to rank highly in the Ease of Doing Business Index. For Mena-region countries, it is the highest.

By developing itself as a business-friendly environment, introducing a world-class infrastructure, and capitalising on its strategic location, the country has solidified its position as an international hub for business, financial and maritime industries.

Over the period of 2014-2016, the country demonstrated a relatively low external-debt-to-GDP ratio, sitting at an average of 60%. By international standards, this is low; and in 2018, it is expected to return to 58%.

Experts agree that both fiscal and current account balances will improve significantly over the coming years.

Foreign Direct Investment inflows on an upward swing

Foreign Direct Investment inflows increased to $10.4 billion in 2017, according to the World Investment Report 2018. As a result, it sits at 30th position for largest global recipient of FDI, and is benefitting from an upwards trajectory: its annual growth was 7.8%.

A notable rebound in global trade in 2017

Last year, we experienced a notable rebound in global trade, as the latest IMF report on the world economy tells us that global GDP growth increased to 3.8% in 2017. For the most part, this was driven by advanced economies making recovery in investments; as well as continued growth in Asia’s emerging countries and substantial gains in oil prices leading to recovery for several commodity exporters.

Looking ahead

Looking forward to the period covering 2018 and 2019, we can now expect global GDP to grow to 3.9%. Strong economic momentum, a positive market sentiment and the US fiscal policy’s expected positive repercussions will all play a role in this brighter future.