Inspiring story: Once one of the poorest nations… now one of the richest

Before it was created from seven arid Gulf desert strips, the UAE was one of the poorest nations. As it enters its fifth decade, the country became the world's sixth richest nation, surpassing most developed economies.

The rating by Forbes magazine noted the rapid expansion in the UAE's economy because of a sharp rise in its oil and gas production coupled with a steady increase in most non-hydrocarbon sectors thanks to high public and private spending.

In the Arab region, the UAE is the second wealthiest nation after Qatar while the rapid rise in its GDP catapulted it to the second place in economic size, outpaced only by Saudi Arabia. But the country is emerging as the regional leader as a capital exporter and commercial hub. Family consumption in the UAE, involving spending on goods and services, is also by far the highest in the Arab world, standing at nearly $25,000 in 2011.

A rapid rise in its banking activity also turned the UAE into the region's main financial centre and allowed its banks to control the largest assets in the Middle East, standing at nearly Dh1,763 billion at the end of September, more than 15 per cent of the total assets of the Arab world's nearly 450 banks.

Official data showed the UAE is expected to maintain its position as the second largest Arab economy as its GDP is projected to gain nearly $17.8 billion in 2012.

GDP at Dh1.31 trillion

The country's GDP peaked at about $358.1 billion (Dh1.314 trillion) in 2011 due to higher output and a surge in oil prices to a record high average of more than $105 a barrel.

The increase last year meant that the UAE's GDP raced by nearly 18.5 per cent in current prices over the 2010 GDP of $368 billion.

Figures by Kuwaiti-based Inter-Arab Investment Guarantee Corporation (IAIGC) showed nominal growth is expected at around 17.8 per cent this year as crude prices are projected to remain above $100 a barrel and the UAE is pumping at one of its highest levels of about 2.6 million bpd.

The report showed that in 2011, the UAE accounted for nearly 17 per cent of the combined Arab GDP and controlled around a third of the total economy of Gulf hydrocarbon producers. It gave no figures for 2011 but the UAE is expected to have maintained that share following a surge of at least 20 per cent in its GDP.

The economic muscle turned the UAE into an investment hub and pushed it to the second largest destination for foreign direct investment (FDI).

IAIGC data showed the country has attracted more than $76 billion in FDI since it was created to emerge as the second largest foreign capital target in the Arab world after Saudi Arabia. The report the FDI flow into the UAE amounted to nearly 12.6 per cent of the total Arab FDI inflow of $603 billion.

The UAE also accounted for nearly 24 per cent of the FDI flow into the six-nation Gulf Cooperation Council (GCC) and 0.4 per cent of the world's direct capital.

As for FDI outflow, the UAE emerged as the top Arab capital exporter. By the end of last year, the UAE has pumped nearly $57.8 billion into global markets.

Attracting one-third of FDI in Arab World

IAIGC figures showed the funds pumped by the UAE into world markets accounted for nearly 32 per cent of the total Arab FDI outflow of nearly $177 billion. In another report, IAIGC showed the UAE has surpassed Saudi Arabia in terms of trade to become the region's commercial hub.

In 2011, the UAE maintained its position as the top Arab country in terms of commercial exchange which exceeded $490 billion, accounting for nearly a quarter of the region's total trade, according to the report.

Exports and imports by the UAE totalled around $490.5 billion in 2011, forming nearly 24.3 per cent of the overall Arab commercial exchange of about $2,013 billion.

Imports were estimated at around $205 billion last year, the highest in the Arab region, while exports stood at $285 billion, the second largest after Saudi Arabia.

Region's commercial hub

Experts believe the UAE will maintain its status as the region's commercial hub and second largest economy thanks to massive public spending, which is fuelled by a hefty increase in its oil export earnings due to strong crude prices.

A sharp rise in crude prices allied with the UAE's high oil output of more than 2.5 million barrels per day boosted its income to an all-time high of more than $110 billion in 2011 and the earnings are projected to swell further this year.

IMF estimates showed the UAE's oil and gas revenue could peak at nearly $122 billion in 2012, when oil output could climb to nearly 2.6 million bpd.

According to the Washington-based IMF, crude prices could climb to a record high average of about $119.7 a barrel this year to break the previous 2011 record of $109.

Higher prices will lift the country's oil and gas export revenues to nearly $122.1 billion in 2012 compared with $111.6 billion in 2011, the IMF said.

Strong crude prices boosted the UAE's income by nearly 38 per cent in 2011 from around $75 billion in 2010, the report showed.

The UAE, one of the world's largest oil and gas suppliers, earned only about $52 billion in 2009, nearly 40 per cent below the 2008 income of around $87 billion because of a sharp fall in oil prices and output.

The IMF said the surge in the UAE's hydrocarbon export income lifted its nominal GDP by around 20.8 per cent to $360 billion in 2011 from $298 billion in 2010. It expected GDP to swell further to $386 billion in 2012 and $394 billion in 2013.

Income could swell further

The country's income could swell further in the coming years as it is expected to boost production of crude oil, condensates and other conventional energy sources to nearly 3.5 million bpd in 2015 to maintain its position as one of the world's largest hydrocarbon suppliers, according to official US data.

The UAE pumped nearly 2.8 million bpd of crude and other energy sources in 2010 and the increase in its production in the following years will be needed to face an increase in global demand and possible decline in other sources.

Figures by the Energy Information Administration (EIA) of the US Department of Energy assumed a reference oil price scenario of between $100 and $150 for the UAE's future oil supply as output could be lower in case of high prices.

In its annual energy outlook report for 2011, EIA expected the UAE's oil and condensates production to slip to around 3.5 million bpd in 2020 and remain unchanged in 2025 before falling back to 3.3 million bpd in 2030.

In the high price scenario, involving prices of between $150 and $200 a barrel, production was projected at 3.2 million bpd in 2015 and 3.3 million bpd in 2020. EIA forecast output at 3.4 million bpd in 2025 and 3.2 million bpd in 2030.

In the low price case of between $50 and $100 a barrel, the UAE's oil and condensates output could be as high as 3.9 million bpd in 2015 on the grounds low prices will spur global oil demand. The report expected output to remain unchanged in 2020 before sliding to 3.7 and 3.4 million bpd in 2025 and 2030.

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