The economy of UAE has been driven mainly by crude oil and natural gas since long, but at the same time, it is also recognized as the most diversified economy in the middle-east region as successful effort of the government towards economic diversification have helped the economy to substantially reduce the dependence of oil and gas sector in the economic activities. GDP (at official exchange rate) is recorded at 378.7 billion as on 2017 with 15 percent contribution from the industry and as high as 78 percent from the service sector.
Although, economic growth has slowed down to 1.3 percent in 2017 from around 4 percent in 2015 and 3 percent in 2016 due to ripple effect of low oil price regime for the last couple of years, recovery is likely to start in 2018 and will consolidate in 2019. The UAE government has developed its National Agenda called ‘Vision 2021’ where it has stressed on making the UAE an economic, touristic and commercial capital for more than two billion people by transitioning to a knowledge-based economy, promoting innovation and R & D, strengthening the regulatory framework for key sectors and encouraging establishment as well as expansion of high value-adding sectors. The global economy will witness significant economic changes in the coming years and the Vision 2021 aims for the UAE to be at its heart. More spending on infrastructure development by the government as a part of the agenda will lead to higher job creation, improve the country’s business environment by inviting more private participation and increase its attractiveness to foreign investment.
UAE is a trade surplus economy. Its export basket constitutes dried fish, dates and re-exports apart from crude oil and natural gas that contributes to nearly 50 percent in exports. Major imports of UAE comprise of machinery and equipment, chemicals and food items. India is one of the largest trading partners of UAE with merchandise trade totaling US$ 53 billion and engineering trade at US$ 6.3 billion in 2017. UAE is the second largest destination for Indian engineering exports with ships, boats and floating structures; iron and steel and its products; copper and its products, and electric machinery as major exported product groups.
Construction is one of the major industries in UAE especially after the new agenda for economic development adopted by the government. The government’s stress on diversification of economic activities includes spending in infrastructure, building new industrial areas and development of education and healthcare has enhanced the scope for construction sector. Another major driver of the upsurge in construction is the mega trade show ‘World Expo 2020’ which is scheduled to be held in Dubai during October 2020. According to mid-2017 reports, a bulk of new projects in urban, industrial, transport, utilities and oil and gas segments are in the tender phase. Strong prospect of construction industry will certainly make room for ‘construction products & machinery’ segment to flourish as an invariable consequence.
Both IMF and the world Bank has projected economic recovery in the UAE in 2018 and further strengthening of the same in 2019. Export earnings will pick up gradually with non-oil goods trade and services outpacing oil export growth. Oil production capacity is expected to increase but the strength of the non-oil economy is to boost prospects particularly in 2019 as mega-project implementation ramps up ahead of Expo 2020 hosted by Dubai.