ABU DHABI 2 December 2017: During the course of the last year, the economy of the United Arab Emirates has continued to make steady progress, despite predictions of a slowdown in economic growth elsewhere in the region.
According to the UAE Vision 2021 plan, the creation and maintaining of a sustainable and diversified economy is a key component of future planning, and progress has continued to be made towards that objective. The intention is that, by 2021, the UAE will have an economy that is flexible in adopting new economic models and that is able to capitalise on global economic partnerships to guarantee long-term prosperity for current and future generations of Emiratis.
Developing a ‘competitive knowledge economy’ is one of the pillars of UAE National Agenda in line with Vision 2021.
According to an official report by the Ministry of Economy, the government has continued in 2017 to focus on the UAE becoming the economic, tourist and commercial capital for more than two billion people. To achieve this, the Government has set 12 Key Performance Indicators: Non-oil real GDP growth, Gross National Income (GNI) per capita, Net Inflow of Foreign Direct Investment as a percentage of GDP, Global Competitiveness Index, Share of UAE nationals in the workforce, Ease of Doing Business Index, Emiratisation Rate in the private sector, the contribution by Small and Medium Enterprises, SME’s, to non-oil GDP, Global Entrepreneurship and Development Index (GEDI), Global Innovation Index, Share of ‘knowledge workers’ in the labour force, and Research and Development expenditure as a percentage of GDP.
The UAE economy has been resilient despite the impact of fluctuating oil prices as it has benefited from a diversified economy, excellent infrastructure, political stability and ample foreign assets, according to the Institute of International Finance, IIF.
“Sentiment has improved with firmer oil prices. Non-oil activity has picked up modestly in 2017 as fiscal drag eases and consumption spending rises in the second half of 2017, ahead of the introduction of value-added tax, VAT, in 2018,” according to Garbis Iradian, Chief Economist Africa Middle East, IIF.
Recently-published figures in the Emirates NDB Purchasing Managers’ Index, PMI, increased from 55.1 in September 2017 to 55.9 in October. As a result, the index moved further above the 50-point threshold that separates expansion from contraction in the non-oil producing private sector.
The monthly PMI through the third quarter of the year resulted in the strongest quarterly expansion of the non-oil economy over a two-year period.
The October figure was underpinned by faster output growth, an expansion in new orders and new export orders, while employment growth continued, marking 18 months of continuous job creation. On the price side, input price inflation was subdued, while output prices fell for the second consecutive month on the back of intense competition.
Focus Economics Consensus Forecast participants expect the UAE’s GDP to grow by 3.2 percent in 2018 and 3.4 percent in 2019, with fixed investment increasing by 3.7 percent in 2018 and 4.3 percent in 2019.
Despite the pressures, the Central Bank recorded a three-month rise in bank deposits in the third quarter, another indication of the improved health of the economy.
Effective October 1st 2017, the UAE marked the beginning of a new era in its history, as it started implementing the Excise Tax, exactly three months ahead of the launch of Value-Added Tax, VAT, another landmark region-wide tax initiative.
“As President His Highness Sheikh Khalifa bin Zayed Al Nahyan issues Federal Decree-Law No. 07 of 2017 on Excise Tax, the UAE takes a great leap forward,” H.H. Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai and UAE Minister of Finance and Chairman of the Federal Tax Authority, FTA, was recorded as saying. “We are making remarkable progress in our plans to establish a sound legislative infrastructure to support the UAE’s tax system and make sure it meets and exceeds international best practices.”
The step is expected to diversify Government economic streams, strengthening the economy and ensuring sustainability, he noted.
“The Excise Tax, in particular, will help us build a healthier and safer society,” Sheikh Hamdan said. “This tax is set to discourage the consumption of products that negatively impact the environment and, more importantly, people’s health, while the revenues it generates will go towards supporting advanced services for all members of society.”
The new legislation requires Excise Tax to be imposed on certain activities around specific “Excise Goods”, activities such as the production or importation of Excise Goods in the UAE, as well as the stockpiling of Excise Goods in the UAE, where these activities are in the course of doing business.
Initial estimates suggest that the tax will generate up to around AED7 billion in annual revenues for the Federal Budget.
On-line registration for Value-Added Tax purposes for businesses began in September.
In the key oil and gas sector of the economy, the most significant development of the year was the announcement that the Abu Dhabi National Oil Company, Adnoc, was to list a minority stake in its subsidiary, Adnoc Distribution, on the Abu Dhabi Securities Exchange.
Announcing the step at the 2017 Abu Dhabi International Petroleum Exhibition and Conference, ADIPEC, in early November, Dr. Sultan bin Ahmad Sultan Al Jaber, Minister of State and CEO of the Adnoc Group, said that, “The planned IPO, to be listed on the Abu Dhabi Securities Exchange, will offer both UAE and international investors an unprecedented opportunity to invest alongside Adnoc in one of the region’s leading retail brands.”
Adnoc, which underwent a major re-structuring and re-branding exercise during the year, will continue to remain wholly owned by the Government of Abu Dhabi.
At an international level, the UAE has continued to perform well against its competitors. In the latest World Competitiveness Ranking of 63 countries by the IMD World Competitiveness Centre, issued in May 2017, the UAE rose to 10th place, making it the only Arab country to find a place among the super league of the global top nations.
In the most recent edition of the Global Competitiveness Report 2017-2018, issued by the World Economic Forum, the UAE topped the Arab world and ranked 17th globally in the global competitiveness ranking. The report also ranked the UAE among the top 20 competitive economies globally for the fifth consecutive year. The country also maintained its ranking to be among the world’s most significant innovation-based economies for the 11th successive year.
Note: On the occasion of the UAE 46th National Day celebrations, the Emirates News Agency (Wam), compiled a series of reports regarding the achievements of the state over the past year. In part one, it looked at the economic growth of the nation over the last 12 months.