Strategic Government Initiatives and Non-Oil Sector Key Contributors
In a promising economic forecast, the UAE is poised for significant expansion, with projected growth rates of 3% in 2023 and an even more robust 4% in 2024. These encouraging predictions are primarily attributed to the remarkable performance of the non-oil sector, which is expected to leverage the buoyant tourism industry, strategic government initiatives, and technological advancements. These optimistic economic outlooks have been endorsed by S&P, one of the world's leading credit rating agencies, following an in-depth analysis of the UAE's economic landscape.
The analysts at S&P, speaking exclusively to the Emirates News Agency (WAM), have underlined the visionary and comprehensive nature of the UAE government's economic and social initiatives over recent years. These initiatives have been strategically designed to lay a robust foundation for sustained, long-term economic expansion, making the UAE a shining example of strategic economic planning and execution.
Tourism Sector Growth
One pivotal factor driving the UAE's economic growth engine is the anticipation of continued dynamism within the nation's vibrant tourism sector. The UAE's capability to host major international events is expected to play an instrumental role in the realization of the UAE's ambitious goal of attracting a staggering 40 million visitors by 2030. This ambitious endeavor is also accompanied by plans to expand the number of hotel rooms to a remarkable 250,000 within the same time frame.
Robust Banking Sector and Real Estate Stability
Among the standout expectations of the S&P analysts is the resilience and vitality of the UAE's banking sector. They anticipate profitability to not only recover but to surpass pre-pandemic levels, largely due to the backdrop of rising interest rates. Furthermore, the Dubai real estate sector is poised for increased flexibility, and housing prices are expected to stabilize, thanks to unwavering demand and stable market conditions.
Trevor Cullinan, a sovereign ratings analyst at S&P, has provided insights into the multifaceted contributors to the UAE's economic growth story, stating that the UAE economy is expected to grow by 3% in 2023 and 4% in 2024, driven by the non-oil sector. These contributors span various sectors, encompassing oil and gas, wholesale trade, industry, real estate, construction, financial services, and tourism. Cullinan has also underscored the importance of the non-oil economy in driving growth. This upward trajectory is well-aligned with the nation's forward-looking "We Are the Emirates 2031" vision, which seeks to bolster trade volume and elevate tourism's share of the country's GDP.
The concerted efforts of government agencies, institutions, and the private sector play an instrumental role in advancing the nation's development process.
Government Initiatives and Economic Diversification
Cullinan further highlights the positive factors expected to bolster the non-oil economy, including the inflow of expatriates and tourists. Additionally, investor sentiment is on an upswing, further cementing the UAE's growth trajectory.
The UAE government's relentless pursuit of economic development has been evidenced by its wide array of commercial and social initiatives implemented over recent years. These initiatives include landmark decisions such as allowing 100% foreign ownership in over a thousand commercial and industrial activities. Also, the introduction of an insolvency law has helped individuals facing financial difficulties to reorganize their debts and access favorable borrowing terms.
1. Enhancing Competitiveness & Visa Reforms
The UAE's unwavering commitment to improving its competitiveness in the ease of doing business has also borne fruit. The introduction of new visas, including the Golden Residence Visa, the Green Residence Visa, and multiple-entry tourist visas, is expected to significantly boost the influx of skilled workers and tourists into the UAE.
2. Capital Market Development & Corporate Tax
The UAE has also taken significant steps to foster the development of its local capital markets by launching treasury bonds and instruments denominated in the UAE dirham. These initiatives will expand the sources of financing available to UAE companies and banks, contributing to overall economic growth. The implementation of a corporate tax system in the UAE is poised to diversify government revenues away from the traditional oil sector, modernizing the country's business environment.
3. Tourism Growth & Real Estate Sector Flexibility
Tatiana Lysenko, Lead Economist for Emerging Markets at S&P, is confident that the growth of the tourism sector will be a significant catalyst for greater economic expansion in the UAE. She points out that Dubai's impressive achievement of attracting 14.7 million international visitors in 2022, double the 2021 figure, is indicative of a flourishing tourism industry. The trend suggests that the number of visitors may reach a peak of 16.7 million in 2019. Additionally, the Emirate of Abu Dhabi witnessed a 24% increase in hotel guests in 2022 compared to the previous year.
Emirates Leading the Way
Lysenko underscores the UAE's attractiveness to tourists and investors alike, fueled by its continuous hosting of significant events, including the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP28). These initiatives will play a pivotal role in achieving the UAE's ambitious tourism target of welcoming 40 million visitors by 2030, accompanied by a parallel endeavor to increase the number of hotel rooms to a staggering 250,000 during the same period.
Furthermore, Lysenko expects the emirates of Abu Dhabi and Dubai to remain at the forefront of attracting businesses and tourists to the country. Simultaneously, other emirates like Ras Al Khaimah and Sharjah are diligently working to promote their tourism sectors. This concerted effort is set to increase the diversity of tourism offerings across the country, enhancing its appeal. Sharjah, for example, serves as a showcase for Arab and Islamic culture and is a family-friendly destination, while Ras Al Khaimah is renowned for its picturesque landscapes, abundant entertainment activities, and authentic cultural experiences.
Real Estate Sector Expectations
Lysenko further predicts that the real estate sector in Dubai will display greater flexibility, with expectations for housing prices to stabilize, thanks to robust demand. The surging interest in Dubai among companies is evident in the increasing number of new commercial licenses issued.
Mohamed Damak, Senior Director and Global Head of Islamic Finance at S&P, emphasizes the enduring strength of the UAE banking sector. He anticipates that profitability will not only rebound but surpass pre-pandemic levels. This positive outlook is attributed to rising interest rates and technological advancements that enhance efficiency in the sector.
Additionally, the capitalization of the UAE banking system is expected to remain robust, supported by improved internal capital generation, favorable financing conditions, and a strong net external assets position. These factors will serve as safeguards against the challenges posed by declining global liquidity and escalating costs.
Conclusion
To sum up, the future of the UAE's economic landscape shines brightly with the promise of remarkable growth. The nation's diversified approach to economic development, underpinned by strategic government initiatives, technological advancements, and an unwavering commitment to tourism sector expansion, sets the stage for a dynamic and resilient economy.
The prudent management of resources and innovative policies have positioned the UAE as a global example of effective economic planning and execution. The nation's proactive approach to fostering business-friendly environments, including allowing 100% foreign ownership in various sectors, streamlining visa procedures, and implementing insolvency laws, has undoubtedly attracted the attention of investors and entrepreneurs from around the world.
As the UAE continues to carve its path toward economic growth and diversification, it showcases its leadership on the global stage. The journey ahead is one filled with promise, where a vibrant economy and visionary initiatives converge to shape a brighter future for the nation and its people. The UAE's economic prospects are not just encouraging; they are a testament to the nation's resilience, vision, and commitment to sustainable growth.
