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Country Forecast United Arab Emirates

  • ID: 2138630
  • Country Profile
  • June 2021
  • Region: United Arab Emirates
  • 52 Pages
  • The Economist Intelligence Unit
Background: As part of efforts to secure its trading routes with India during the 19th century, the UK concluded a series of truces and protectorate agreements with individual sheikhdoms in the Gulf. These agreements eventually gave rise to what became known as the Trucial States, covering much of the present-day UAE. There was little in the way of economic development or outside interest in the area until oil was discovered off the coast of Abu Dhabi in 1958. The UK withdrew from the region in 1968, and the sheikhdoms formed a loose federation. In 1971 the UAE became an independent state.

Political structure: The Supreme Council is the highest federal authority and comprises the hereditary rulers of the seven emirates. Between 1971 and 1996 the UAE operated under a provisional constitution renewed every five years. In 1996 the seven emirates made the constitution permanent and accepted Abu Dhabi as their capital. Sheikh Khalifa bin Zayed al-Nahyan became president of the UAE and ruler of Abu Dhabi in 2004, following the death of his father. The council appoints the prime minister-traditionally the ruler of the second-largest emirate, Dubai-currently Sheikh Mohammed bin Rashid al-Maktoum.

Policy issues: Immediate concerns centre on managing the public health and economic impacts of the coronavirus pandemic. The pandemic's impact on Dubai's economy is particularly pronounced, with its hospitality, tourism and real estate sectors affected. Over the longer term Abu Dhabi and Dubai will continue to focus on diversifying their economic base. The UAE will remain reliant on expatriate labour but will continue to encourage more nationals to enter the private-sector workforce. Regionally, the UAE will move forward with normalising ties with Israel and remain active in supporting political allies and challenging perceived threats from Islamists and Iran, but will adopt a more conciliatory stance in its foreign policy.
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Country Forecast United Arab Emirates

United Arab Emirates--highlights: Political outlook

United Arab Emirates--highlights: Business environment outlook

United Arab Emirates--highlights: Economic outlook

United Arab Emirates--highlights: Demographic outlook

United Arab Emirates--highlights: Market opportunities

United Arab Emirates--highlights: Long-term outlook

Fact sheet

Political outlook: Political forces at a glance

Political outlook: Political stability

Political outlook: Political and institutional effectiveness
The pandemic crisis is reshaping government thinking
Efforts are under way to streamline the justice system

Political outlook: Election watch

Political outlook: International relations

Business environment outlook: Business environment rankings
The authorities will maintain some support packages into 2022

Business environment outlook: United Arab Emirates' business environment at a glance
Policy towards private enterprise and competition
Policy towards foreign investment
Foreign trade and exchange controls
The labour market
Technological readiness

Business environment outlook: Macroeconomic environment
Government support and vaccination key to recovery

Business environment outlook: Policy towards private enterprise and competition
Emirate and federal support to the private sector will continue
Stimulus measures aim to channel liquidity to private-sector firms
SME support will be prioritised

Business environment outlook: Policy towards foreign investment
Commercial Companies legislative reform has the potential to open up FDI
Emirates will have some say in how the reform is implemented
Free zones will remain important for attracting foreign investment

Business environment outlook: Foreign trade and exchange controls
The UAE will continue to expand its re-exports, despite regional pressures
Asia will be the UAE's primary focus

Business environment outlook: Taxes
Following the introduction of VAT, no major federal tax changes are expected

Business environment outlook: Financing
Interest rates have been slashed in response to the pandemic
Banks face rising NPLs but are adequately capitalised
Digital banking accelerates

Business environment outlook: The labour market
The government is seeking ways to retain most skilled expatriates
The authorities are keen for nationals to take private-sector job opportunities

Business environment outlook: Infrastructure
Transport infrastructure investment constrained by pandemic
The UAE rail system is developing, but regional connections prove harder

Business environment outlook: Technological readiness
Technology is seen as key to long-term growth
Online connectivity will improve further

Economic forecast: Policy trends

Economic forecast: Fiscal policy

Economic forecast: Monetary policy

Economic forecast: International assumptions

Economic forecast: Economic growth

Economic forecast: Sectoral trends
Industry and manufacturing will remain important
Housing oversupply will remain an issue for the construction sector
Tourism will take longer to recover
Banking sector loan quality will weaken
Oil and gas still receiving investment
Greater self-sufficiency in gas will be pursued

Economic forecast: Inflation

Economic forecast: Exchange rates

Economic forecast: External sector

Economic forecast: Foreign direct investment in United Arab Emirates
Stocks and flows
Origin and distribution

Demographic assumptions
The pandemic has led to an exodus of expatriates
Foreign labour will continue to make up the bulk of the UAE workforce
The authorities hope to encourage nationals to join the private sector
Emiratisation will require a delicate balancing act

Market opportunities: Market outlook
The UAE market will not return to its 2020 pre-pandemic size until 2022
The UAE will be an important regional base for foreign firms

Market opportunities: Consumer expenditure
Retail sector headwinds compounded by pandemic
UAE consumers will continue to exhibit sophisticated spending patterns

Long-term outlook: The long-term outlook

Long-term outlook: Long-term trends
Climate change and sustainability
Technological developments

Long-term outlook: Methodology for long-term forecasts
Growth projections
Definitions of variables
The independent variables include:
Summary of findings
Productivity growth

Data summary: Global outlook

Data summary: Gross domestic product, current market prices

Data summary: Gross domestic product, at constant prices

Data summary: Gross domestic product by sector of origin

Data summary: Growth and productivity

Data summary: Economic structure, income and market size

Data summary: Fiscal indicators

Data summary: Monetary indicators

Data summary: Employment, wages and prices

Data summary: Current account and terms of trade

Data summary: Foreign direct investment

Data summary: External debt

Data sources and definitions
Global data
Domestic data

Guide to the business rankings model
Outline of the model
Calculating the rankings
Measurement and grading issues

Indicator scores in the business rankings model
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