Future looks bright as UAE builds on its economy through diversification
With oil prices plummeting, residents of oil-exporting countries like the UAE have been waiting nervously each month as the economy continues to face challenges.
But a recent study by the International Monetary Fund (IMF) has revealed that the UAE is achieving new levels of economic growth.
Following a recent visit to the country, Christine Lagarde, IMF managing director, commended local authorities for taking vital steps in advancing the economy, but stressed the importance of continuing to expand the non-oil segment.
“During my meetings, I commended the UAE authorities for having built large fiscal and external buffers, advancing economic diversification and, more recently, taking steps to address the consequences of the sharp drop of oil prices, notably the reform of fuel subsidies,” Lagarde explained. “At the same time, I highlighted the importance of pursuing gradual fiscal consolidation by raising non-oil revenues and fully phasing out energy subsidies, as well as the need to safeguard financial stability and to continue implementing growth-enhancing reforms.”
During her visit, Lagarde also noted she was “impressed by the country’s dynamism and determination to place the UAE among the most competitive countries in the world”. According to the World Economic Forum, the UAE is the second largest economy in the region and 17th globally, yet the government is setting its sights on being one of the most competitive economies in the world by 2021.
Despite the fact the UAE is the world’s sixth largest oil exporter, revenues in the sector account for only 30 percent of total financial resources.
HE Obaid Humaid Al Tayer, Minister of State for Financial Affairs, said: “The decline in oil prices is considered a great opportunity to restructure the economy and stimulate more economic diversification factors, encourage production and industrial sectors to enhance its contribution in the GDP of the UAE. MoF (Ministry of Finance) is implementing a long-term strategy with clear objectives to develop a suitable environment for expanding the productive base and industrial sector, enhancing reliance on non-oil sectors, boosting investment in infrastructure and supporting foreign trade. This will in turn support economic integration and the growth of the UAE’s economy.”
Dr Hazem Al Beblawi, executive director of IMF, added, “The decrease in oil revenues paved the way to implement VAT on a regional level, and UAE had qualitative steps in this field. Aside from implementing economic diversification policies, decreasing oil dependency and strengthening and supporting innovative projects, the Ministry announced the beginning of VAT implementation in the coming years; to be, as witnessed, a pioneer in implementing and adopting fiscal and monetary reforms in the regional and international level”.
Efforts are also being made to help the country achieve its vision of being a “knowledge-based economy founded on a spirit of creativity and innovation”, by encouraging entrepreneurialism, fostering education initiatives and more.