UAE Macroeconomic Indicators
The UAE has been following a largely successful, stringent
diversification strategy away from oil dependency and has been
equally committed to its outward-orientated growth policy. The
UAE’s vision to define itself as a regional centre and international
trading hub is gradually being realized and, irrespective of oil, the
UAE economy has been booming.
DCCI has conducted a research to examine the healthiness of the
UAE economy by focusing on its main macroeconomic indicators.
Below we will highlight some of these indicators in brief.
Gross Domestic Product (GDP)
During the last decade the UAE economy had shown steady
growth and the value of total GDP has more than doubled totaling
AED 358 billion in 2005 (see Figure 1). Oil’s share in GDP has
declined, whilst non-oil GDP has been the major driver behind the
UAE’s economic growth (accounting for 73% of GDP in 2005).
The fact that oil’s share in GDP has decreased over time can be
attributed to the strategic plan pursued by the UAE government to
diversify its economy away from oil dependency. The major non-
oil sectors in the UAE economy are: manufacturing (20%); trade
(17%); real estate (12%); construction (11%); transport, storage &
communication (10%); and finance (9%).
Figure 1. UAE GDP at Basic Prices 1994-2005
Source: UAE Ministry of Economy
Abu Dhabi and Dubai were the primary contributors to GDP in
2005 at 59% and 28.9% respectively. The remaining 12.1% was
distributed over the other 5 Emirates as follows: Sharjah (7.4%),
Ajman (1.2%), Umm Al-Quwain (0.4%), Ras Al-Khaimah
(1.9%), and Fujeirah (1.2%).
It is worth mentioning here that although Abu Dhabi was the main
contributor to UAE GDP, almost 56% of the Emirate’s GDP is
derived from oil. In contrast, oil only contributes to around 5% of
Dubai’s GDP; reflective of its diversity. A similar structure applies
for the rest of Emirates; specifically, oil represents 12% and 9% of
the GDP of Sharjah and Ras Al-Khaimah, whilst in the rest of
Emirates oil does not exceed 2% of GDP for each. More
interesting, Dubai is actually the main responsible for the
remarkable growth witnessed in the majority of the UAE non-oil
sectors.
Labor and Capital Productivity
Overall, the UAE’s partial capital productivity significantly exceeds
its labor productivity in 2004. One unit of capital produces AED
2,850 thousand units of GDP compared to one unit of labor that
produces AED 711 thousand units of output. Non-oil labor
productivity in the UAE was valued at AED 567 thousand units
whereas non-oil capital productivity was valued at AED 4,409
thousand units.
Government Budget
Over the last five years government expenditures have generally
been increasing; although they did fall marginally in 2002. Between
2004 and 2005 government expenditure grew by 15%, vastly
exceeding the 2% growth in the previous years. From 2000 to 2002
government revenues declined and as a result the government ran a
budget deficit from 2001 to 2003. A decline in oil revenues
combined with simultaneous increases in government
expenditures, on subsidies, transfers and real estate developments,
meant that the gap between revenues and expenditures widened.
However, more recently, from 2003 to 2005, the government’s
revenues have actually been increasing, and as a result the
government has converted the budget deficit –witnessed between
2001 and 2003– into a surplus. The government budget recorded
a surplus of AED 56,773 million in 2005.
Trade Balance
The UAE trade balance when including oil has shown trade surplus
over the last few years. In 2004 the surplus was 19% of GDP with
a value of AED 63 billion. However, the trade balance excluding oil
shows trade deficit throughout the last decade. Nonetheless, since
2000 the deficit has been decreasing; in 1999 and 2000 the deficit
was at a maximum 26% of GDP, whereas in 2004 it stood at only
8% of GDP with a value of AED 27 billion.
Inflation
For the past five years the UAE has been experiencing creeping
inflation (6.2% in 2005). In some sectors, such as the housing
sector, inflation is becoming more of a problem and may start to
impede on economic growth if the creeping persists. Therefore,
authorities must take measures to prevent any further increases in
inflation and curtail the potentially detrimental economic
consequences that it may produce.
Labor Force
In 2004 the UAE labor force accounted to 2,731 thousand, out of
a total population of 4,320 thousand. The unique structure of the
UAE’s labor force, with its dependency on foreign workers, has
meant that unemployment levels in the UAE are notably low; 3%
in 2004.
Finally, the UAE’s macroeconomic indicators in general signal a
healthy, booming economy experiencing steady growth.