Meed | UAE rides high on non-oil boom

UAE rides high on non-oil boom

26 April 2024

Commentary
John Bambridge
Analysis editor

The UAE has demonstrated remarkable economic resilience in recent years, with its non-oil sector bouncing back relatively quickly from Covid-19 and emerging as the real driving force behind the country’s growth.

Despite slower oil activity due to the Opec+ oil production cuts and regional turmoil, the non-oil sector has continued to go from strength to strength and is enjoying a resurgent boom in its real estate sector, with levels of activity not seen since before the 2008 global financial crash.

Among the other drivers of UAE non-oil growth are the country’s rapid expansion and rollout of free trade agreements, with it having signed comprehensive economic partnership deals with 12 countries to date. In the absence of much progress on GCC-wide trade agreements, Abu Dhabi is opening itself up to greater trade opportunities with other markets.

Another significant recent development was the UAE’s removal from the Financial Action Task Force’s ‘grey list’ in 2024, which has bolstered investor confidence and general business sentiment.

On the projects side, there is a real estate and construction boom, with over $475bn-worth of private real estate developments and public building and housing programmes planned or under way. Transport schemes at the top of the agenda include the UAE-Oman rail scheme and a high-speed rail link connecting Abu Dhabi and Dubai.

Also in the works is the $22bn Dubai Strategic Sewerage Tunnel project. Such a network would have served the city well in mid-April, when its infrastructure fared poorly against the hardest rainfall in 75 years.

On the oil side of the economy, Abu Dhabi National Oil Company (Adnoc) remains committed to expanding its upstream operations and is expected to maintain robust spending on key projects in 2024. Close to $8bn-worth of combined midstream, downstream and petrochemicals contracts are also expected to be awarded this year.

The conflict in Gaza poses an increasingly serious challenge to the region, however. The UAE has so far remained relatively quiescent on the conflict while concentrating on humanitarian operations. The country is clearly keen to retain the economic benefits that it has been enjoying since its normalisation of ties with Israel under the Abraham Accords.

The newly kindled relationship is being tested, however, with the airstrike on the aid convoy of the World Central Kitchen drawing some of the harshest words from Abu Dhabi towards Tel Aviv to date.

The risk of rising escalation with Iran meanwhile could quickly quench the current exuberance of the UAE’s buoyant non-oil sector.