Recently released international statistics point out to extraordinary progress of the UAE economy. These sources include but are not limited to the International Monetary Fund (IMF) plus the Bank for International Settlements. The UAE economy now ranks the second largest economy in the Arab region, larger than that of either Egypt or Algeria.
Only the gross domestic product (GDP) of Saudi Arabia outweighs that of the UAE. It is projected that the UAE's real (adjusted for inflation) GDP would amount to $181 billion in 2007, up from $163 billion in 2006. The achievement could be made on the back of a whopping 8.
2 per cent real GDP growth. Still, non-oil GDP should grow by 6.6 per cent.
Non-oil GDP growth is uniquely vital in the light of firm petroleum prices. Oil sector is the single largest contributor to UAE's GDP. Surprisingly, inflation is projected to decline this year and next.
As such, consumer price index (CPI) stood at a hefty 11 per cent in 2006 only to drop to just over 6 per cent by 2007 and 4.6 per cent in 2008. This improvement is partly attributed to efforts by Dubai with regards to capping annual rental increase at seven per cent.
Nevertheless, the UAE economy will continue suffering from inflationary pressures due to economic policy of linking the dirham to the dollar. Low value of the dollar versus other major currencies such as euro and yen results in what is known as importing inflation. The US maintains a low value for the dollar in order to make American products cheaper abroad as part of efforts to contain trade deficit, which stood at $818 billion in 2006.
In addition, thanks to firm oil prices, the country's trade balance is projected to post trade balance in the neighbourhood of $50 billion in each of 2007 and 2008. The petroleum sector accounts for three-quarters of total UAE exports. Still, the UAE holds a substantial amount of foreign exchange reserves.
The amount is sufficient to cover imports of more than 6 months. This is a sizable quantity, as the planned monetary union within the Gulf Cooperation Council (GCC) requires member states maintaining reserves equivalent to four months' imports. The GCC states desire to become a monetary union by the year 2010.
Yet, authorities in the UAE are determined to further strengthen the country's economic fortunes as evidenced in two strategic plans uncovered during the year. In April, officials revealed the UAE Government Strategy that spans a three-year period (2007 to 2010). The plan is categorised in six sectors: social development, economic development, government sector development, safety and justice, infrastructure, and rural areas development.
According to His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, "The UAE Government Strategy aims to achieve sustainable and balanced development and ensure continued quality and high standards of living." Still, numerous principles guide the strategy. These include increasing efficiency of governmental departments and empowering ministries to manage their own activities In February Shaikh Mohammad unveiled the Dubai Strategic Plan (DSP), which aims at making Dubai a leading city not just in the Arab world but on a global level as well.
Similar to the UAE Government Strategy, DSP is not confined to economic goals. In fact, the plan is divided into five sections, namely: economic development; social development; infrastructure, land and environment; safety, security and justice; and finally public sector excellence. Clearly, UAE authorities are aiming high.
The writer is a Member of Parliament in Bahrain. Recently released international statistics point out to extraordinary progress of the UAE economy.
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