Despite recent fluctuations in oil prices and the global economic recession, the UAE enjoyed a stable economy. Some of the features of the UAE's economy are:
The UAE enjoys a strategic location between Asia, Europe and Africa. Thousands of Chinese businesses use Dubai as a hub for trading in Africa. Indian traders use the emirate to access the world. Latin Americans see the country as a launching platform into South Asia. Western nationals use Dubai as a hub for the Middle East.
- Strong financial reserves
The UAE maintains strong financial reserves and has a durable banking sector, which makes it safe for investment. According to a report in Khaleej Times, International Monetary Fund forecasts that the gross official reserves of the UAE would grow from USD 76.8 billion in 2015 to USD 118.4 billion in 2020. The current account surplus would grow from USD 17.6 billion in 2015 to USD 33.4 billion by 2020.
According to a report in The National, Standard & Poor's, a financial services company, has rated Abu Dhabi AA indicating that its capacity to meet its financial commitment is very strong in the long term.
Sharjah and Ras Al Khaimah were rated A/A-1 indicating that their capacity to meet its financial commitment is strong in the short term.
- Large sovereign wealth fund
According to the June 2016 figures of Sovereign Wealth Fund Institute, Abu Dhabi Investment Authority is the largest sovereign wealth fund in the Middle East and the fifth largest in the world with USD 792 billion.
- Promising investor home economies
According to an UNCTAD World Investment Report of 2014, the UAE ranks 11th as the most promising investor home economies.
- Consistent government spending
Government spending on infrastructure continues to receive a major injection of capital. Abu Dhabi continues to develop the infrastructure required for one of the wealthiest cities in the world.
Dubai is implementing new projects for hosting World Expo in 2020; AED 30 billion will be spent on infrastructure at the Expo site and the city.
The UAE plans to spend AED six billion on major infrastructure developments across the country, including road networks and federal buildings. Khalifa Initiative in the Northern Emirates is designed to ensure that inhabitants of these emirates enjoy the same facilities as those living in the larger emirates of Abu Dhabi and Dubai.
The UAE is also working on the Etihad Rail project, which will offer a significant leap in land transport by year 2021.
- Progressive policy of economic diversification
The policy of economic diversification has led into impressive development in key sectors such as tourism, air transport, trade, financial services, manufacturing and alternative energy. The UAE has made progress towards ending its economic dependence on hydrocarbons. Oil industries accounted for around 30 per cent of GDP in 2014, down from 79 per cent in 1980.
The UAE has several multi-specialty free zones which offer several economic incentives such as exemption from corporate taxes and import/export duties and full foreign ownership with 100 per cent profit repatriation. There are about 45 free zones in the UAE. According to a report in Gulf News, free zones contributed to 33 per cent of the UAE's non-oil trade in 2014.
- Increased foreign direct investment (FDI)
According to the Economic Report 2018 released by the UAE's Ministry of Economy, the UAE attracted about USD 10.4 billion of foreign direct investment during 2017 with an average growth rate of 1.6 per cent during the period from 2012-2017. The UAE was ranked first among the countries most attractive to foreign direct investment in the Middle East and Africa region.
Updated on 20 Apr 2021