The United Arab Emirates, a federation of seven family-ruled emirates led by Abu Dhabi, is flourishing as never before. Non-oil exports alone have shown substantial growth in last five years by chipping in 10% to the economy, though the GDP growth relies mostly on oil trade. The population of the second largest economy in the Arab world is getting wealthier by the day despite global meltdown fears. UAE oil and gas industries cut output by 1.7 million barrels per day in November 2006 and February 2007. The reduced output was offset by higher crude oil prices then and the recent windfall in oil prices has further augmented growth. Revenue generated through oil is mostly utilized for diversification including infrastructural developments, manufacturing, transport, tourism, financial services and trade services.
This rapid economic growth is mainly attributed to an outward economic development strategy, favorable business climate and rising oil prices among others. The country’s investments in emerging economies like China, India and various other economically prospective countries have helped to reap significant dividends to boost the economy further. Increased purchasing power, notwithstanding, put pressure on inflationary spiral which has neared 10%, but this is expected to ease in the coming years due to higher growth in various sectors and ever rising oil prices. According to International Monetary Fund (IMF), it is expected that inflation will gradually fall and will average about 5% during the period 2008-2012.
The economic data provided by the UAE ministry states that growth last year was 7.6% slower in comparison with the previous year’s 9.4%, yet predicted a repeat performance in 2008 with 9.5%, which is an average growth rate in last five years. The government’s broad-spectrum planning is one of the other reasons why the economy is making an impressive growth. Though external borrowings have increased in the last few years, the country being a net creditor (i.e. foreign liabilities are more than offset by UAE foreign assets), would not have to worry much about maintaining its fiscal balance.