According to the ‘The ICAEW Economic Insight’ report by Oxford Economics, the UAE economy is benefitting the most from the growth in global tourism and rebound in global trade flows of all the GCC countries. The report says that the UAE is the most diversified economy among all GCC countries and has better economic outlook. The country’s economic system is much bigger than the fuel, which only contributes 22 per cent to the total export revenue of the UAE.
In the past year, UAE’s economy has witnessed a bigger contribution from the non-oil industries, which is likely to result in up to 1.7 per cent growth in the country’s GDP in 2017. The GDP rate is expected to grow further as much as 3.3 per cent in 2018.
One of the main reasons behind this economic growth is the solid infrastructure investments in the country. With the world’s third biggest Airport and the ninth most used container port, UAE’s infrastructure is one of the best for business.
The global traffic received at the Dubai International Airport increased by over 7 per cent in the first quarter of 2017, which resulted in the further growth of the non-oil sector. UAE’s economy is witnessing several new important infrastructure projects, mainly because of Expo 2020. The total number of constructions performed in the first quarter of the year were 26 per cent more as compared to the first quarter of 2016.
The banking system in the country witnessed less liquidity pressure because of the stabilization in oil prices, sovereign debt issuance, and the soothing pace of austerity over the past year and so. Private bank deposits grew by almost 9 per cent in the year so far, which resulted in 7 per cent growth in the lending rate during this period.
Michael Armstrong, FCA and ICAEW regional director for the MEASA, also confirmed the ICAEW report and said, “The UAE is in a stronger position than other countries in the region due to its diversified economy, excellent infrastructure, political stability and ample foreign assets. Its reputation as a trade hub has helped the country to benefit from the rebound in the world economy more immediately than other economies in the GCC.”
The new value added tax (VAT), which is expected to be launched in GCC countries in the beginning of 2018, may push inflation to up to 4 per cent. UAE consumers are likely to feel the pressure to spend less after the launch of VAT in the country. The government’s decision to charge excise duties on tobacco products and soft drinks will further increase this pressure. This may overall affect the spending capabilities of the consumers despite the growth in the economy.