With its sights set on recovery and transformation, the UAE government continues to diversify the economy away from oil, boosting private sector growth.

While the mega initiative such as the Industrial strategy - Operation 300 billion announced by the Ministry of Industry and Advanced Technology in March will play its part, recent regulatory changes – such as amendments to the commercial companies’ law and the offer of citizenship to talented residents – will support the country’s plan to boost output.

For now, the signs are positive with the economy seen rebounding this year from 2020s Covid-19 pandemic induced downturn, with growth in the non-oil sector leading the upturn.Promising signs of recovery have been evident in the most recent economic data (non-oil), as confirmed by a report.

Business conditions in the UAE non-oil private sector continued to improve in April, with new business growth reaching a 20-month high, a survey showed, as the Gulf state’s economy recovers from  the pandemic, a Reuters report said.

The seasonally adjusted IHS Markit UAE Purchasing Managers’ Index (PMI), which covers manufacturing and services, edged up to 52.7 in April from 52.6 in March. This was its highest level since July 2019 and the fifth consecutive month it has held above the 50.0 line that separates growth from contraction.

“The UAE non-oil economy remains on the right track to a recovery from Covid-19,” said David Owen, economist at IHS Markit. The index was supported by strong growth in business volumes and output. New orders grew at their fastest rate since August 2019.

“That said, the rate of improvement in operating conditions was still below the 12-year survey average, reflecting further pandemic-related disruptions for a number of businesses and sectors,” Owen said.

Surveyed firms said market conditions improved due to the rollout of Covid-19 vaccines and stronger business confidence. The UAE – where the economy contracted 5.9 per cent last year, according to the International Monetary Fund (IMF) – has had one of the world’s fastest Covid-19 vaccination programmes.

Business expectations improved for the fifth consecutive month, according to the survey, on hopes of a continued recovery from the coronavirus crisis and stronger sales when Dubai hosts the Expo 2020 event later this year.

Non-oil GDP grows

The positive growth rates of the UAE’s economy will be restored by the end of 2021, estimating  a 2.5 per cent growth in real gross domestic product (GDP), and 3.6 per cent in non-oil real GDP, said Abdulla Bin Touq Al Marri, UAE Minister of Economy.

These figures are expected to rise to 3.5 per cent growth in real GDP, and 3.9 per cent growth in non-oil real GDP in 2022, he added, citing estimates released by the Central Bank of the UAE. In 2020, the UAE’s GDP stood at almost AED1.42 trillion at constant prices, with non-oil GDP making up just over AED1 trillion of this.

The activation of non-oil economic initiatives has impacted positively the country’s non-oil GDP which registered AED1.005 trillion ($274 billion) at constant prices in 2020, while the GDP at constant prices stood at AED1.418 trillion.

In addition, government spending surged by more than AED1.17 billion year-on-year (YoY) in 2020, while investments resulting from capital additions grew by 3.9 per cent, amounting to more than AED13.1 billion.

Meanwhile, the manufacturing industries grew by 0.2 per cent YoY in 2020. The sector has witnessed commendable growth in recent years, particularly in sectors such as metal processing, furniture, industrial preparation of food stuff, aluminium production, construction materials, fertilisers and real estate. Industry now comprises 46.2 per cent of GDP and employs 34 per cent of the workforce.

The continuation of the recovery plan and support packages is expected to support the UAE’s economy to restore growth, which aims to double its economy over the next 10 years to reach AED3 trillion by 2031, he revealed.

The Ministry of Economy and other government entities are “working according to an ambitious vision to double our national economy over the next 10 years to reach AED3 trillion by 2031,” Al Marri said.