The main drivers of the UAE economy have been the non-oil sector with tourism, hospitality and real estate taking the lead. The economy grew by 4.5% in 2013. The economy seems to have come out of the slow down it witnessed a few years back and real estate prices seem to have recovered and be on the upswing. Oil fueled growth would be limited though with global supply being ample. Growth in 2014 and over the next few years will be fueled mainly by the increase in planned mega projects and Dubai’s successful bid for Expo 2020. The concerns on growth trajectories would be the pace of planning and execution of the new projects. Given past experience and the considerable debt overhang, the fear is that of a real estate bubble which might burst if sufficient prudential regulations are not put in place. Though with the newly implemented regulations on loan concentration and real estate exposure for banks which will help protect the soundness of the banking system and contain risks to banks balance sheets in the context of the newly planned mega-projects, there seems to be less to worry about. The economy is expected to continue to grow at the rate of 4.5% in 2014.
The hydrocarbon sector, primarily located in Abu Dhabi, produced 2.7 million barrels per day, accounted for 80% of total revenues, 40% of GDP and grew at a rate of 3% in 2013. Despite accelerating non-oil sector growth, UAE is the fourth leading OPEC producer. UAE has oil and gas reserves estimated at 138 billion barrels, or 88 years worth at current production rates. Abu Dhabi is consolidated its oil sector strength by awarding three construction contracts worth $7.7 billion to expand offshore production by 300,000 barrels a day. Abu Dhabi has also approved a joint venture to build a liquefied natural gas re-gasification facility with a capacity of 1.2 billion standard cubic feet of natural gas per day. As strong as UAE’s hydrocarbon sector is, it’s non-hydrocarbon sectors have surpassed it. UAE ‘s real estate and construction sector is characterized by distinct trends in its two largest cities, Dubai and Abu Dhabi. Dubai is one of the world’s most dynamic real estate markets with property prices rising by more than 30% in 2012 and 2013. Part of the property sector’s growth is spurred by anticipation of Dubai’s hosting of the 2020 Expo and the government’s plans to spend $6.8 in infrastructure in advance of the event. The IMF estimates Dubai’s government and government related entities’ debt at $142 billion or 102% of nominal GDP of the emirate. UAE's Central Bank has responded by imposing mortgage restrictions and fees on foreign buyers to deter speculation, slow the market and avoid a bubble. Abu Dhabi ‘s property market has been relatively flat despite a large construction program. The transport sector remains a critical piece of UAE's economic strategy. A new airport opened in Abu Dhabi in 2012 and is currently undergoing a massive expansion. The airport accommodated 12.2 million passengers in the first nine months of 2013, an increase of 12% over the same period in 2012. Dubai World Central Airport is also undergoing an expansion to make it the world’s largest airport. Dubai in the first nine months of 2013 reported a 16% increase in passengers, a total of 49 million people. Once expansion plans are complete the airport will be able to accommodate 160 million a year. UAE is building a $73 million freeway and spending $1.3 billion for the first portion of what will eventually be a railway linking UAE’s emirates with the rest of the GCC. Tourism continues to perform well as UAE benefits from unrest in the rest of the region. Dubai attracted 5.5 million tourists and Abu Dhabi reported 1.3 million visitors in the first six months of 2013, an increase of 11.1% and 12% respectively compared to the first six months of 2012.
UAE’S overall doing business ranking (ranked 133 out of 189 economies) declined by 4 ranks in 2014 from 2013. Almost all the indices declined from last year with the rankings being- starting a business (114), dealing with construction permits(101), getting electricity(116), registering property (61), getting credit (170), protecting investors(138), paying taxes (129), trading across borders(128) and resolving insolvency (126). UAE ranks 1 in the region having the best business environment in the region.