Chronicle of the Middle East and North Africa

Economy of the UAE

The Emirati economy, competitive and open thanks to a favourable environment, was swiftly able to recover from the consequences of the COVID-19 pandemic. However, it also faces some challenges, such as increasing tax revenues, reducing reliance on oil production, and nationalisation of the workforce.

Economy of the UAE
Vehicles queue to refuel at a petrol station in Dubai on June 30, 2022. Giuseppe CACACE / AFP

Ali Noureddine

The United Arab Emirates has adopted a highly open economic model focusing on creating a secure and stable investment environment. It offers attractive investment and tax incentives alongside streamlined regulations for businesses and the private sector.

In recent decades, the UAE has made constant efforts to enhance the competitiveness of its domestic economy. These efforts have involved infrastructure development and comprehensive government strategies aimed at increasing the contribution of non-oil sectors and attracting foreign investment. The most recent milestone was the amendment of the Federal Law on Commercial Companies in 2020, which allowed foreigners to establish companies with 100 per cent ownership without needing an Emirati agent or shareho

Diversifying the Economy

Since its establishment, the UAE has made remarkable strides in diversifying its economy and reducing reliance on oil exports. According to the Federal Competitiveness and Statistics Centre, the contribution of non-oil sectors to the country’s GDP increased to 73.5 per cent in the first quarter of 2022, compared to a mere 10 per cent at the time of the UAE’s founding in 1971. In 2022, the UAE achieved unprecedented records in non-oil foreign trade, exceeding AED 2.233 trillion (approximately $608.44 billion) amounting to a substantial growth of 17 per cent compared to 2021.

As the third-largest oil producer within the OPEC organisation, the UAE has substantial production capacity. Since 2009, its oil production has experienced a notable upward trend, rising from around 2.256 million barrels per day to over 3 million in 2018. By 2023, it reached 3.5 million barrels daily, marking a remarkable 55 per cent increase over 14 years. This expansion has allowed the UAE to invest in infrastructure projects and develop the public sector, contributing to the growth of non-oil sectors. It is worth mentioning that Abu Dhabi alone holds approximately 96 per cent of the country’s oil reserves, while the remaining six emirates share the remaining crude oil reserves.

Strategic Location

In addition to its oil industry, flexible economic laws, and business-friendly environment, the UAE holds several other advantages that have contributed to developing its economic sectors and attracting Foreign Direct Investments (FDI).

The UAE’s strategic location connects major economic and demographic blocs, including Europe, India, China, and Africa. It is also close to major oil and gas-producing countries like Saudi Arabia, Qatar, and Kuwait. This favourable location has made the UAE appealing for companies aiming to establish a regional business hub in the Middle East or utilise it as a centre for re-exporting or manufacturing, given the competitiveness of its investment environment compared to neighbouring countries. Dubai, in particular, has leveraged this advantage by offering tax incentives and an open market model, attracting the regional headquarters of major companies operating in neighbouring oil-rich countries.

The UAE boasts a robust financial sector. According to the Central Bank of the UAE (CBUAE), bank deposits exceeded AED 2.24 trillion (around $610 billion) at the start of 2023, around 1.37 times its expected GDP for 2022. By the end of 2022, the CBUAE’s foreign assets exceeded $134.57 billion, representing approximately 30 per cent of the UAE’s GDP. Such substantial solvency has empowered the UAE’s financial sector to play a crucial role in supporting economic growth and fulfilling the financing needs of various productive sectors.

Furthermore, the UAE reaps the benefits of its massive sovereign wealth funds, established to allocate a portion of the revenues generated from the country’s petroleum activities. For instance, the Abu Dhabi Investment Authority (ADIA) held assets worth about $683 billion at the beginning of 2023, making it the world’s third-largest sovereign wealth fund. Other notable funds include the Investment Corporation of Dubai, with assets valued at $229.8 billion in early 2023, and the Mubadala Investment Company, with assets worth $226 billion during the same year.

Despite possessing numerous competitive advantages, the UAE now faces emerging competition from Saudi Arabia, which has the potential to impact the UAE’s current position as a regional economic powerhouse. Since 2022, Saudi Arabia has been actively working towards transforming Riyadh into a regional economic hub, akin to Dubai’s current role, through generous infrastructure spending and tax incentives to attract investors. Moreover, Saudi Arabia is emulating the UAE’s success by facilitating private-sector operations and implementing more flexible economic regulations. Consequently, the UAE-Saudi competition over assuming the leading regional financial hub’s role will determine their governments’ performance in the coming years.

COVID-19 and the Economy

The outbreak of the COVID-19 pandemic in 2020 placed significant economic strains on the UAE’s economy, exacerbated by a notable decline in global oil prices. The average annual price of Brent crude oil fell to roughly $41.96 per barrel that year, compared to $64.28 per barrel in 2019. In essence, global oil prices plummeted a substantial 35 per cent between 2019 and 2020, resulting in a significant loss of revenue for the UAE’s budget and domestic economy from oil production and exports.

Simultaneously, the pandemic dealt a severe blow to tourism, with its contribution to the GDP falling from 11.6 per cent in 2019 to 5.4 per cent in 2020, as the UAE Ministry of Economy reported. According to the World Bank, the number of arrivals to the UAE dropped from 25.82 million in 2019 to 8.08 million in 2020.

The pandemic’s impact on global consumption rates also had a ripple effect on all non-oil productive activities in the same year. Consequently, according to the UAE Ministry of Economy, the contribution of real estate investments to the GDP decreased from 50.23 billion Dirham [3.68B USD] in 2019 to 47.15 billion [12.84B USD in 2020], a decline of 6.1%.

In conclusion, these factors culminated in a 5 per cent contraction in the UAE’s real GDP in 2020, as stated by the IMF. Despite these challenges, the UAE successfully limited the crisis’s impact on its overall state debt. The general budget deficit was confined to a mere 0.2 per cent of its GDP during that year.


Eventually, the effects of the pandemic gradually receded, and global energy demand began to rebound. Subsequently, the UAE reaped the benefits of the global increase in the average price of oil, which reached approximately $70.86 per barrel in 2021. The UAE further took advantage as the average price per barrel surged to $100.93 in 2022 due to the Russia-Ukraine conflict and sustained high energy demand. Furthermore, OPEC’s decision to refrain from increasing production, followed by production cuts by OPEC+, contributed to further oil price increases in global markets.

Simultaneously, thanks to its small population and strong financial capabilities, the UAE was the first to achieve 100 per cent vaccination against COVID-19. This achievement was pivotal in swiftly reviving tourism and other productive sectors, leading to a quicker recovery than in other countries in the Middle East and North Africa.

The robust recovery of tourism has persisted in subsequent years. Data from the Emirates Tourism Council reveal that the number of hotel nights increased by 10 per cent in the first quarter of 2022 compared to the same period in 2019 before the pandemic. During the same period, the average duration of hotel guest stays rose by 25 per cent, and hotel revenues grew by 20 per cent. The figures demonstrate that the tourism industry has steadily grown after the COVID-19 pandemic.

As a result, the UAE achieved remarkable growth rates that surpassed the previous projections of the IMF in 2021 and 2022. Following a 3.9 per cent GDP growth in 2021, the IMF estimates that the UAE’s GDP grew by approximately 7.4 per cent in 2022.

In April 2023, the IMF forecasted that the UAE would continue to experience significant growth of around 3.5 per cent in 2023 due to the sustained pressure on global oil prices and the anticipated growth in non-oil sector activities within the UAE. The UAE’s import bill is expected to rise due to high inflation rates in global markets in 2023. However, it is anticipated that this will not significantly impact the country’s monetary situation, as the current upswing in oil prices has generated surpluses to offset any potential difficulties.


Despite the positive developments in the UAE’s economy, significant challenges must be addressed, such as the need to increase tax revenue as a percentage of the total budget revenues to reduce reliance on oil production. The tax revenue only accounts for around 55 per cent of the total budget revenues, leaving the budget vulnerable to oil price fluctuations, as seen in 2020. These risks can impact the funding planned for infrastructure projects and slow GDP growth in the coming years.

Another concern for the UAE government is workforce nationalisation (Emiratisation), which aims to employ Emirati nationals in the private sector. The government has set a target to raise Emiratisation rates for skilled jobs in private sector establishments with 50 or more employees to 2 per cent annually, aiming to reach a 10 per cent rate by 2026. To enforce such a plan, fines have been imposed on non-compliant establishments starting from January 2023, amounting to AED 6,000 per job that fails to meet nationalisation targets. Additionally, there will be an annual increase of AED 1,000 per job in the fines imposed.

According to the Ministry of Human Resources and Emiratisation, the Emiratisation rate in the private sector reached 3.72 per cent in 2021.

Economic Competitiveness and Global Market Position

In 2022, the UAE maintained its position as the leading country in the MENA region in the IMD World Competitiveness Yearbook (WCY) for the sixth consecutive year, ranking 12th globally. The WCY assesses economies based on 334 indicators across four factors: economic performance, government efficiency, business efficiency, and infrastructure.

According to the WCY, the UAE achieved top rankings in many indicators. These include the flexibility of residency laws, the government’s ability to adapt policies, low levels of tax evasion, effective management of cities, a high percentage of internet users, the development of energy infrastructure, and the lack of industrial disputes. These achievements can be attributed to the government’s focus on creating a business-friendly ecosystem through legislative revisions and government services automation.

The UAE’s diverse population, including skilled foreign labour, contributed to its high rankings in indicators such as the availability of competent senior managers, international experience, and a skilled workforce. The country’s significant investment in the telecommunications sector also led to top rankings in indicators like cyber security and development and application of technology.

Regionally, the UAE ranked first, followed by Qatar in second place, while Saudi Arabia ranked third regionally and 24th globally. Saudi Arabia’s ranking indicates that the kingdom still has some ground to cover regarding the competitiveness and FDI attractiveness race against the UAE.

Infrastructure and Transportation

The UAE holds the top regional rank in the MENA and ranks 11th globally in the UNIDO’s Quality Infrastructure for Sustainable Development Index. The UAE surpassed several advanced infrastructure nations, including Portugal, Singapore, Finland, Denmark, and Belgium. The index assesses five key elements to evaluate infrastructure strength and efficiency: standardisation, metrology, accreditation, conformity assessment, and quality policy.

Substantial investments in transportation, road networks, communications, electricity, and empowering both public and private sectors through enhancing public services have fueled the UAE’s infrastructure development. Currently, there are seven federal entities responsible for infrastructure development. These include the Ministry of Energy & Infrastructure, the Ministry of Climate Change & Environment, the Telecommunications and Digital Government Regulatory Authority, the General Civil Aviation Authority, the Federal Competitiveness and Statistics Centre, the Sheikh Zayed Housing Programme, and the Emirates Post Group. Their work is supervised and managed by the nine municipalities in the UAE, each operating within their respective jurisdictions.


The UAE has 22 airports across its seven emirates, comprising four major, seven medium-sized, and 11 small airports. Dubai International Airport stands as one of the busiest globally, facilitating connections to over 240 international destinations and serving flights from more than 100 airlines. Dubai is also home to Al Maktoum International Airport, now named Dubai World Central, recognised as the world’s largest cargo logistics hub.

Abu Dhabi Emirate houses Abu Dhabi International Airport, catering to over 30 airlines and connecting to more than 100 destinations worldwide. Distinguished by advanced facility management technologies, the airport also features an automated smart travel system, considered the most advanced in the region. Sharjah has the Sharjah International Airport, renowned for its open sky policy, allowing worldwide airline traffic access to the airport. This policy has facilitated the airport’s expansion, surpassing the five million annual passenger milestone.


In addition to its airports, the UAE boasts an extensive network of highways that seamlessly connect its seven emirates and major cities. According to the World Economic Forum’s Global Competitiveness Report, the UAE ranks among the top seven countries regarding road quality. The UAE’s highway network consists of eight main roads, each serving a specific purpose:

– E11: The longest road in the UAE; it stretches from Al Sila in Abu Dhabi and ends in Ras al-Khaimah.

– E311: It was known as Emirates Road. The road links Dubai to the rest of the emirates.

– E611: It is a 110 km long road that stretches from Ras Al Khaimah, Umm al-Quwain, Ajman, and Sharjah, heading to Abu Dhabi without having to go through downtown Dubai.

– Sheikh Khalifa highway: It links Dubai and Fujairah.

– Sheikh Khalifa bin Zayed road: It links the villages in the eastern region.

– Dubai-Fujairah Road: It runs through the emirates of Dubai, Sharjah, and Ras al-Khaimah

– Dubai-al-Ain Road: it links Dubai with al-Ain City.

– Sheikh Zayed Bridge: It connects the mainland to the island of Abu Dhabi.


The UAE is committed to enhancing the efficiency of electricity production through the “Electricity Market” project. This project fosters competition among electricity companies, driving them to utilise the best available resources and provide top-quality services to residents. The UAE’s ambitious National Energy Strategy 2050 aims to increase clean energy in the future energy mix to 50 per cent, ultimately achieving complete climate neutrality by 2050. To this end, the UAE is actively pursuing various green hydrogen production projects to establish an environmentally friendly infrastructure in the electricity sector.


Dubai is widely recognised for its extensive metro system. The Dubai Metro is the world’s largest driverless and fully automated metro rail network, covering 74.6 km and stopping at 49 stations, of which nine are underground. These metro stations are seamlessly connected to a comprehensive network of transportation options, including bus connections, taxi stops, and water buses, providing commuters with diverse choices for travelling within the city.

Meanwhile, in Abu Dhabi, plans are underway to establish a metro network spanning 131 km. This ambitious project aims to connect key areas, residential clusters, and tourist centres within the emirate and connect it with Dubai, forging stronger economic and logistical ties between the two emirates.


ُEmirati seaports are renowned for their services, experiencing significant demand due to the UAE’s robust commercial activity and the substantial growth in foreign trade over the past few decades. Currently, the country has twelve commercial ports and more than 310 berths. Among these notable ports is Zayed Port in Abu Dhabi, which is currently dedicated to cruise liners. Also, Dubai stands out with its acclaimed Mina Rashid and Jebel Ali Port, both operated by DP World, which are pivotal in facilitating trade in the UAE. Sharjah Emirate has the Khor Fakkan Container Terminal, the only natural deep-water port in the region, with a strategic position for deep-sea container trade.

Service sector

The World Bank has noticed a significant increase of the service sector’s share in the UAE’s GDP over the past decade, from 41.3 per cent in 2011 to 51.6 per cent in 2021. Concurrently, the proportion of workers employed in the service sector out of the total labour force has risen from approximately 60 per cent in 2009 to 64.44 per cent. These figures highlight the increasing significance of the service sector within the UAE economy. This growth is part of the country’s efforts to diversify its economy and reduce reliance on oil-related industries. Currently, the service sector ranks second in contribution to the GDP, trailing only the oil sector. It encompasses various activities such as tourism, restaurants, hotels, transportation, transit, communications, financial and business services, insurance, health services, and other sectors.

In 2020, the UAE announced it would allow foreign investors full ownership of companies. This decision profoundly impacted the service sector, particularly in areas such as financial services, brokerage, insurance, reinsurance, and trade. The ability to conduct economic activities without needing local partners motivated investors to increase their investments in these sectors, which hold significant importance in the country’s economy. This decision resulted in a growth of 13.7 per cent in 2021 in the total balance of foreign direct investment (FDI), as reported by the UAE Ministry of Economy.

The UAE has earned a prominent reputation as a leading destination for medical tourism offered by healthcare institutions. Over the years, the UAE has successfully developed its healthcare services, largely driven by significant investments in the health sector. According to figures released by the UAE Ministry of Finance, the spending on health services in the general budget for the year 2022 reached 4.766 billion AED (approximately $1.3 billion).


According to World Bank data, the contribution of industrial activities to the UAE’s GDP has increased from 41 per cent in 2016 to 47.5 per cent in 2021. This growth can be attributed to the country’s focus on developing infrastructure supporting industry. In 2021, industrial activities provided an added value of $167.2 billion to the UAE economy.

Approximately 34 per cent of the UAE’s labour force is employed in the industrial sector, highlighting its significance in creating job opportunities. In Dubai, Emiratis make up around 2 per cent of the total labour force in the industrial sector, as per figures from the Dubai Statistics Center.

The Ministry of Industry and Advanced Technology plays a vital role in supporting industrial activity by implementing the “Operation 300Bn” strategy, which aims to increase the industrial sector’s contribution to GDP to 300 billion dirhams by 2031. The government-owned Emirates Development Bank is a key component of this plan. It provides funding programmes, financial advisory services, and support for startups and small and medium-sized enterprises, fostering entrepreneurship and innovation. In order to achieve this objective, the bank has allocated a portfolio of 30 billion AED to provide assistance to several priority industrial sectors in the UAE.

The UAE’s strategy focuses on developing five key industrial activities:

– Healthcare: medical supplies, pharmaceuticals, and biotechnology

– Food industry and related activities

– Technology: renewable energy, educational technology, storage devices, and electronics

– Infrastructure: energy, communications, transportation, and digital infrastructure

– Manufacturing petrochemicals and plastics

This strategy aligns with existing plans for infrastructure development, the health sector, and information technology, utilising the country’s oil wealth as a competitive advantage for petrochemical industry growth.

Agriculture and Livestock

Desert dominates the landscape of the UAE, and comprises over three-quarters of its total area. This arid environment, characterised by minimal rainfall, dry sandy terrain, and hot temperatures throughout the year, poses significant challenges to food security.

To address this sensitivity, the UAE has placed special emphasis on the agricultural sector and livestock. It has established the National System for Sustainable Agriculture in 2020 to enhance crop self-sufficiency, improve the sector’s economic viability, attract investments, and leverage technology for increased food production. Additionally, the government set up a dedicated Ministry of Food and Water Security to oversee the implementation of this plan.

Presently, the UAE is actively engaged in agricultural and livestock projects with a focus on cultivating wheat farms in Mleiha, Sharjah. This effort aims to meet the food demand and bolster production levels to ensure ample supply for Sharjah. These initiatives significantly enhance the UAE’s food security by reducing reliance on imported wheat.

The government also focuses on developing fish farms and animal feed factories, as well as increasing desalinated water production to support agricultural growth. They are also organising strategic food reserves and monitoring consumption and demand rates. Simultaneously, the government is undertaking various projects to develop and reclaim agricultural lands distributed to investors interested in agricultural ventures. It provides financial facilities and loans to finance agricultural projects. The UAE placed significant importance on establishing research centres dedicated to agricultural scientific experiments to enhance the efficiency and productivity of the local agricultural sector.

Regarding food security, the UAE is implementing the “National Food Security Strategy 2051.” This strategy aims to establish a comprehensive national system that enables sustainable food production by utilising modern technology, enhancing local production, fostering international partnerships to diversify food sources, and implementing legislation and policies that enhance nutrition and reduce waste to ensure food security under all circumstances.

According to the Global Food Security Index published by Economist Impact, the UAE was the top country in the MENA regarding food security in 2022. Globally, the UAE secured the 23rd position in this index, marking a significant improvement of 12 points compared to 2012.

Based on data from the World Bank, the added value of agricultural activities to the Emirati economy increased from $2.21 billion in 2010 to $3.79 billion in 2021. However, the percentage of workers in the agricultural sector declined from 3 per cent of the total workforce in 2010 to 1 per cent in 2019, indicating that the expansion of agricultural production relied on adopting reliable methods to enhance productivity.


Trade has played a significant role in the growth and prosperity of cities in the Emirates, including Sharjah and Dubai. These cities have a rich history of maritime trade with Persia, India, the islands of the Indian Ocean, and the eastern coast of Africa. Before the discovery of oil and gas, the locals relied on pearl diving and trade as a primary source of livelihood.

Following the establishment of the United Arab Emirates, the country gradually emerged as a major trade hub by leveraging its strategic location. This transformation was facilitated by the expansion of its ports, the adoption of an open economy, and the implementation of regulations that facilitate and attract investments.

The UAE has emphasised infrastructure development to support commercial activities, particularly in the logistics and transportation sectors, thereby expanding the scope of trade. In parallel, the UAE has established over forty free zones, including Jebel Ali in Dubai, Masdar City in Abu Dhabi, and the Hamriyah Free Zone in Sharjah. These free zones offer significant advantages, such as tax exemptions, incentives, streamlined formal procedures, and simplified commercial operations.

According to the UAE Ministry of Economy, the volume of non-oil foreign trade totalled AED 2.23 trillion (equivalent to $599 billion) in 2022, marking a 17 per cent increase compared to the previous year. In 2022, non-oil exports experienced a six per cent year-over-year growth and a remarkable 52 per cent growth compared to 2019, highlighting a substantial increase in the productivity of the UAE’s non-oil sectors.

The UAE is actively pursuing development of trade relations with specific countries, including India, with which it concluded a comprehensive free trade agreement in 2022. With the agreement, the country aims to increase its trade with India to $100 billion between 2023 and 2027.

China, the United States, and Saudi Arabia are among the UAE’s top trading partners. At the same time, trade between the UAE and Turkey has witnessed notable development, with a forty per cent increase in trade in 2022. In March 2023, both countries signed a free trade agreement, aiming to increase bilateral trade to $40 billion in the five years ahead.

As part of the Abraham Accords, the UAE and Israel established diplomatic relations in September 2020. This enabled public normalisation of trade relations between the two nations. In April 2023, the Comprehensive Economic Partnership Agreement between the UAE and Israel came into effect. This agreement establishes an open and non-discriminatory trade environment, enabling service providers in both countries to access local services in the other country.

The UAE Ministry of Economy anticipates that this agreement will expand trade between the two parties, surpassing $10 billion within five years. Additionally, it is expected to contribute to an increase of approximately $1.9 billion in the UAE’s GDP by 2030.

Data from the United Nations indicate a significant rise in UAE exports to Israel, reaching approximately $942.96 million in 2022, compared to only $115 million in 2020. Conversely, Israeli exports to the UAE increased to around $635.53 million in 2022, compared to $74 million in 2020.


Between 2021 and 2022, tourism in UAE rapidly recovered following the COVID-19 pandemic. According to data from Dubai’s Department of Economy and Tourism, the number of international tourists visiting Dubai increased by 97 per cent in 2022 compared to the previous year, surpassing 14.36 million visitors and exceeding pre-pandemic levels. Hotel occupancy rates reached nearly 73 per cent, outperforming neighbouring countries. Dubai stands out as a prominent tourist destination in the UAE, and the Dubai Economic Agenda (D33) aims to make the city one of the top three international economic hubs.

Dubai’s international visitors come from diverse nationalities and cultures. In 2022, tourists from Western Europe and the Gulf Cooperation Council countries accounted for 21 per cent, those from South Asia for 17 per cent, the Middle East and North Africa for 12 per cent, and the Americas for 7 per cent.

Other emirates, such as Abu Dhabi and Sharjah, are also enhancing their tourism sectors, drawing inspiration from Dubai’s success. Abu Dhabi established the Department of Culture and Tourism to foster tourism and culture, as well as the National Library. Through developing these sectors, the authority aims to elevate Abu Dhabi’s global standing as a sustainable tourism destination. Their goal is to offer unique tourist and cultural experiences that align with Abu Dhabi’s economic vision for 2030 while preserving the emirate’s heritage and culture.

Development Aid

The UAE has a longstanding commitment to providing development aid all over the world. During the COVID-19 pandemic from March 2020 to July 2021, the UAE provided 135 countries worldwide with 2,154 tons of medical aid, ventilators, screening equipment, personal protection equipment and testing kits, according to government figures. It conducted 196 medical aid flights and built six field hospitals in Sudan, Guinea-Conakry, Mauritania, Sierra Leone, Lebanon, Jordan, and a mobile clinic in Turkmenistan.

The UAE has provided approximately AED 320 billion (roughly $88 billion) in development and charitable aid from its inception in 1971 until 2021. Over 150 countries worldwide have benefited from this aid, and the UAE government remains committed to these efforts, in line with the United Nations’ Sustainable Development Goals for 2030.