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UAE: Macroeconomic Country Outlook

GlobalData forecasts the real GDP to grow by 4.3% in 2022, as almost all COVID-19 restrictions are lifted which will support resumption of economic activities.
The UAE was ranked 14th out of 136 nations in the GCRI Q4 2021.
According to GlobalData, UAE announced to boost the industrial sector by 150% over the next five years through the expansion of foreign export markets for local products by 50%.

PESTLE Summary

Political: The UAE’s stance on Russia’s invasion of Ukraine. The unannounced war between Russia and Ukraine has an impact on the world politics, economy, and global market systems. In March 2022, the UAE provided 30 tonnes of emergency health aid and medical supplies to support displaced Ukrainians and refugees. The country also announced to allocate $5 million in response to the UN’s emergency appeal and the Regional Response Plan for Ukrainian refugees, caused by the UAE’s commitment to the Principles of Humanitarian Solidarity in conflicts. During the same month, the UAE denied voting on a US-drafted resolution that would have condemned Moscow’s invasion to encourage all parties to resort to diplomatic action.
Economic: The UAE focuses on economic diversification. According to the Ministry of Economy, the total value of UAE’s non-oil trade with the World grew by 27% annually in H1 2021, amounting to AED900 billion ($254.1 billion) as the country continued to recover from pandemic due to its rapid vaccination program and government stimulus measures. In addition, the UAE’s non-oil exports grew annually by 44% in H1 2021 and by 41%, compared to the same period of 2019. The contribution of non-oil exports to the UAE’s non-oil foreign trade grew to 19% in H1 2021, compared to 16.6% in 2020 and 14.2% in 2019. The non-oil imports increased by 24.0% annually in H1 2021.
Social: Comprehensive health insurance. The UAE’s constitution guarantees access to healthcare. The National Health Insurance Company (Daman) has provided the Abu Dhabi Basic Plan, which stipulates the minimum level of health insurance cover required for expats in the emirate. The total number of doctors was 24,345 in 2018, equivalent to 2.5 doctors per 1,000 persons in the same year, according to MarketLine. As of January 2021, the UAE government announced that it would provide expanded medical insurance coverage to underprivileged frontline workers as well as their immediate families.
Technology: Growing ICT sector. The UAE is becoming a lucrative destination for IT development, in part due to the strong telecommunications network at its disposal. In terms of ICT and organizational model creations, the UAE was ranked 24th out of 132 countries, which is better as compared to other Middle Eastern nations, including Qatar (33rd), Saudi Arabia (40th), Bahrain (51st), and Iran (92nd) in the Global Innovation Index (2021). In terms of ICT services exports as a percentage of total trade, the country is one of the frontrunners from the Middle Eastern region. The UAE was ranked 58th out of 132 countries as compared to its Middle Eastern peer-group nations such as Qatar (79th), Saudi Arabia (92nd), and Iran (125th) in the Global Innovation Index (2021). In 2021, Amazon Web Services is expected to introduce a new data center, which would get operational in the first half of 2022. In January 2022, the country announced a plan to invest $1 billion by 2026 to boost data centers.
Legal: New Labor Law. In November 2021, the Ministry of Human Resources & Emiratisation (MOHRE) introduced new labor law in the country that came into effect on February 02, 2022. The regulation aims to address changes in the work environment along with labor relations with international best practices as well as flexible working structures for labors in the UAE. The new law will introduce several key changes, which include (i) part-time employees will be entitled to vacation leave on a pro-rated basis (ii) employees will enter into fixed-term employment contracts for a maximum period of three years, however, contracts can be renewed on multiple occasions for similar or shorter periods (iiI) payment within 14 days from the termination date (iv) no arbitrary dismissal in the country.
Environmental: Step towards renewable energy. In 2021, the Ministry of Climate Change and Environment introduced the General Environmental Policy. Some of the main objectives of the policy include increasing the clean energy contribution in the UAE energy mix to 50% by 2050, and reducing energy consumption at the individual and institutional levels by 40% by 2050. The policy aims to reduce the intensity of municipal solid waste generation to 1.4 (kg/person/day) by 2025 and to 1.2 (kg/person/day) by 2035. According to the Ministry of Climate Change and Environment, other targets also include the use of environmentally safe refrigerants to eliminate ozone-depleting substances by 2040 and achieving zero accidents due to inappropriate unsafe use of chemicals by 2025. In October 2021, the country announced to invest $163 billion in clean and renewable energy by 2050, which aims to become the first Gulf country to commit to Net Zero emissions by 2050.

Key fundamentals

Macroeconomic outlook

According to a report published by the International Trade Administration, the UAE has been the top export market for the US since 12 years. The country is also a global hub for more than 1500 US-based companies. The economy of the country grew rapidly due to its openness to international business, and strategic location as a gateway to the region.
On March 28, 2022, the UAE and India entered into a Comprehensive Economic Partnership Agreement (CEPA). The agreement would boost trade and economic ties between the two countries. During the same period, the UAE signed MoU with Italy to enhance the agricultural sector.
In September 2021, the crown prince of Abu Dhabi and deputy supreme commander of the armed forces announced the launch of “Operation 300 billion”. The country aims to increase its manufacturing output towards the nation’s economic output to AED300 billion ($81.7 billion) by 2031, as the UAE embarks on a national program to boost local production and create world-beating light and heavy industries.
The aim of this initiative is to make the UAE’s industrial sector become the primary driving force of the national economy by doubling its contribution towards GDP.

GlobalData Country Risk Index (GCRI) - Q4 2021

The UAE was ranked 16th out of 190 countries in World Bank’s Doing Business Report (2020). The UAE’s score (80.9 out of 100) in the World Bank’s Doing Business Report (2020) is ahead of the regional average score of 60.2 and nations such as Bahrain (76), Saudi Arabia (71.6) and Kuwait (67.4). Starting a business in the UAE takes four days with 2.5 procedures as compared to Saudi Arabia where it takes 10.5 days with 3.5 procedures. The UAE was ranked first in getting electricity and third in dealing with construction permits out of 190 countries. The UAE aims to reposition itself as a global hub for business and finance due to the increasing amount of competition the country is facing from Saudi Arabia.

GCRI Methodology

GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies on the basis of historical developments in an economy.

The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources and incorporates proprietary data from GlobalData. Middle East and North African countries in this publication include Egypt, Israel, Saudi Arabia, United Arab Emirates, Morocco, and Iran.

About the report

GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.

More details: United Arab Emirates (UAE) PESTLE Insights – A Macroeconomic Outlook Report

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