Diversification over the decades and an effective coronavirus response last year accounts for the country’s past and present successes
The UAE economy has expanded 57 times in the past five decades, rising from AED6.5billion to about ED353.9bn in 2020. In 2021, gross domestic product is expected to swell to AED373.15bn, as per International Monetary Fund estimates. Furthermore, the UAE’s response to the coronavirus pandemic has been praised in the IMF, which has accordingly increased its forecast for the country’s economic growth in 2021 from 1.2% in October to 3.1%.
This is in line with what Stephen Anderson, Middle East Strategy and Markets Leader, for PwC Middle East, discussed at the Arabian Business Forum in late February where he said the UAE economy is “moving in such a positive way forward” to become the world’s leading post-Covid-19 economy. The country has been widely praised for its response to the global pandemic, which initially saw the implementation of strict lockdown measures, before a gradual reopening from May last year.
Anderson said the country’s response to the health crisis had been “fantastic” and added that the brand of Dubai and the UAE will be “enhanced enormously” as a result of the swift actions taken. Overall, the UAE is now the 35th-largest economy in the world, up from about 140th half a century ago. While oil and gas has been the most dominant industry
over the decades, propelling the economic engine of the UAE, its diversification drive has reduced reliance on this space. Trade, transportation, tourism, retail and real estate have been the five key drivers of growth in recent years. “Moving away from complete oil dependence half a century ago, the share of hydrocarbon activity in the economy fell to 65% in 1990 and 29% last year,” said Giyas Gokkent, chief economist of Mena House.
“The share of services rose to half the economy, while the share of manufacturing rose to just under a tenth. “The increase in the share of non-hydrocarbon activity to almost three-quarters of the economy moved hand-in-hand with a more than fifty-fold increase in the population from 180,000 in 1968 to about 9.5million.”
Another sector that has witnessed commendable growth in recent years is manufacturing, particularly in sectors such as metal processing, furniture, industrial preparation of foodstuffs, aluminium production, construction materials, fertilisers and real estate. Industry now comprises 46.2% of GDP and employs 34% of the workforce. “In the last 10 years, light manufacturing and some heavy manufacturing activities have taken root and shown signs of maturing and becoming major players in the non-oil sector,” said Sanjay Modak, professor of economics at RIT Dubai. “Manufacturing is growing very significantly and is diversifying into new areas. For instance, Abu Dhabi is diversifying into aerospace and health equipment,”
“Health tourism is another sunrise industry, and there is growing interest in agriculture too,” he added. Considering the significant leaps the UAE has made in the past 50 years, it could be a tough act to replicate the scale and speed of development in the next 50 — and what’s needed is a shift in strategy. “It will require a shift towards a more manufacturing and knowledge-based economy, while still nurturing services,” Gokkent said. “Now, this has already been under way with services and manufacturing doubling their share in activity since 1990. “The share of hydrocarbon activity will decline further hopefully because of this steady shift towards increased nonhydrocarbon activity. Changes in technology and, over time, depletion of hydrocarbon resources make this shift imperative. “In brief, the UAE economy needs to continue to open up and invite business and people to continue along its success story of the previous half century.”