Oil boom helps UAE become second largest Arab economy

Heavy investments boosted the UAE economy by at least 20 per cent in current prices during the oil boom of the past eight years to catapult the country to the second largest Arab economy after Saudi Arabia, official figures have shown.

Cumulative public and private investment climbed a staggering Dh900.6 billion during 2001-08, more than double their size in the previous eight years, showed the figures by the Ministry of Economy.

The surge in investments, which were listed as gross fixed capital formation, was a result of a sharp rise in the country's oil export earnings and strong domestic demand which encouraged the private sector to invest heavily.

From around Dh254.2bn in 2001, the UAE's gross domestic product (GDP) leaped to a record Dh927bn in current prices last year, an average annual growth of around 20.8 per cent, the Ministry said.

The highest growth rate was recorded in 2006, when it jumped by 32.7 per cent mainly because of a sharp increase in oil prices and the country's crude output, as well as higher growth in non-oil sectors.

High growth was also recorded in 2008, when the nominal GDP swelled by 27.4 per cent after crude prices climbed to a record high level.

OIL AND GAS

A breakdown showed oil and gas recorded the highest growth during 2001-08, with an annual average of 24.1 per cent.

It was followed by the financial sector, which covers banks and other related institutions, recording a growth rate of 23 per cent in the same period.

Another rapid growing sector was construction, which jumped by 22.5 per cent while growth averaged around 19.5 per cent in trade, nearly 19 per cent in real estate and about 18.1 per cent in the non-oil manufacturing sector.

The report gave no figures on the value of each sector in 2008, but in 2007, the oil sector remained the dominant component of the GDP, with a value of around Dh261bn or nearly 35.8 per cent. It was followed by the manufacturing sector, which contributed around Dh94.5bn or 13 per cent of the GDP.

Trade emerged as the third largest sector in 2007, with a value of Dh65bn, followed by construction and real estate, which contributed by Dh58.3bn and Dh55.7bn.

INVESTMENT

According to the report, total investments have sharply grown over the past eight years, and nearly 30 per cent of them were pumped in 2008.

From around Dh60bn in 2001, the investments shot up to Dh81bn in 2004 and Dh120bn in 2006.

They soared to Dh148.4bn in 2007 and recorded their highest growth in 2008 to peak at Dh261.4bn.

"In 2008, the UAE netted its highest oil revenue and recorded a massive budget surplus…it was normal to see a surge in investments although I believe there was a slowdown in the fourth quarter because of the global financial crisis," an Abu Dhabi-based banker said.

"I think private investments were also at their highest level because of strong domestic demand high liquidity in the first half of the year… many sectors benefited from this rise, mainly industry, real estate, construction and trade."

A breakdown showed the manufacturing sector was the top beneficiary from those investments, receiving nearly Dh139bn during 2001-08.

It was followed by the real estate sector, which attracted around Dh120bn, and the hydrocarbon sector, with around Dh95bn. Other key recipients included trade, construction, communication and tourism.

DUBAI GROWTH

Emirate-wise, Abu Dhabi maintained its position as the largest economy in the UAE while Dubai recorded the highest growth during 2001-07.

The report gave no figures for 2008 but in 2007, Abu Dhabi's GDP stood at around Dh400bn, nearly 55 per cent of the UAE's economy. Dubai had the second largest GDP of Dh226.6bn, nearly 31 per cent but it recorded the highest growth of about three per cent during that period. Sharjah was the third largest economy in the UAE in 2007, followed by Ras Al Khaimah, Ajman, Fujeirah and Umm Al Quwain.

The surge in the UAE's economy, which was one of the smallest in the Middle East two decades ago, maintained its position last year as having the second largest GDP in the region after that of Saudi Arabia.

Economists believe the status will be maintained this year despite an expected economic slowdown.

PER CAPITA

Although the UAE's population is recording one of the world's highest growth rates of around seven per cent in the past decade, its per capita income has maintained its momentum thanks to the rapid GDP growth.

From around Dh80,000 in 2001, the GDP per capita edged up to Dh81,500 in 2002 but began its rapid climb in the following years go reach Dh102,000 in 2004 and Dh128,000 in 2005. It jumped to Dh147,000 in 2006 and Dh162,000 in 2007 before peaking at around Dh195,000 in 2008. At that level in 2008, the UAE had the second highest per capita income in the Arab world after Qatar and one of the world's largest.

In its section about public finance, the report estimated the cumulative surplus in the country's consolidated finance account (CFA), which covers federal spending and the budget of each emirate, at around Dh183bn during 2005-07 against a deficit of Dh45.2bn during 2001-04. It provided no 2008 data but independent estimates showed the CFA recorded its highest surplus of more than Dh200bn.

The report showed oil and gas earnings accounted for an average 75 per cent of the UAE's total revenue during 2001-2008.

A breakdown showed the oil and gas income stood at Dh176bn in 2007 while total revenues were estimated at Dh228.7bn.

Other revenues were sourced to taxes, customs and profits of public enterprises.

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