The UAE has become a model for development and in the Gulf Co-operation Council (GCC) as its economy is making huge leaps and diversification programmes are paying off, according to a key Kuwait bank.
A surge in oil prices has allied with an upswing in other sectors to sharply boost the GDP over the past few years and it is projected to double within the next five years, the National Bank of Kuwait (NBK) said. In a study published this week, the government-controlled Bank said the UAE has used a sharp growth in its petrodollar income to build up its overseas assets, which have swelled to a staggering $500 to 900 billion (Dh1.8 trillion to 3.3trn).
“The boom in the UAE, one of the Gulf region’s most dynamic economies, is now in its fifth consecutive year and is cementing the country’s reputation as a model for development in the GCC region as a whole,” the study said. “Between 2002 and 2006, the UAE economy more than doubled in size, with nominal growth averaging 22 per cent per annum.”
It said that as in other Gulf oil producing countries, rising crude prices and higher oil production have played a key role in boosting UAE’s economic growth.
But unlike unlike its neighbors, the non-oil sector has enjoyed a pivotal role, contributing around half of the total increase in GDP since 2002, the study noted.
“Indeed, the UAE’s economy may have reached a point of critical mass, whereby oil revenues can be used to support, rather than drive, economic development. We expect this remarkable performance to continue and the economy to double in size again by 2012 on the back of massive investment plans, which could ease the supply-side bottlenecks and inflationary pressures that have built up over the past two years.”
Citing UAE official estimates, it said an estimated $500bn is expected to be spent over the next five years on over 400 new ventures, in addition to the 300 or so projects, worth in excess of $110bn underway.
“The policy of economic diversification, visible in the dramatic changes throughout the country, did not happen by chance, but has been part of government strategy since 1971,” it said.
“One aspect of diversification has been the broadening of the government’s income streams. A portion of successive oil windfalls has been re-invested through government-owned investment arms, the largest being Abu Dhabi Investment Authority. According to a 2007 report by the McKinsey Global Institute diversification programmes have not detracted the UAE from developing its oil and gas sector as there are plans to pump nearly $50bn into projects to expand crude and gas output.
By 2012, such projects will boost oil production capacity to four million bpd from three million bpd at present.