United Arab Emirates has a reputation of being a secure and largely tax-free destination for international financial services and companies, both big and small. With company formation options in mainland, free zone, and offshore, entrepreneurs can choose which jurisdiction is best for their business activity.
Economy of the United Arab Emirates
The UAE has developed from a juxtaposition of Bedouin tribes to one of the world’s most wealthy states in only about 50 years. Economic growth has been impressive and steady throughout the history of this young confederation of emirates with brief periods of recessions only, e.g. in the global financial and economic crisis years 2008–09, and a couple of more mixed years starting in 2015 and persisting until 2019. Between 2000 and 2018, average real Gross Domestic Product (GDP) growth was at close to 4%. It is the second largest economy in the GCC (after Saudi Arabia), with a nominal gross domestic product (GDP) of US$414.2 billion, and a real GDP of 392.8 billion constant 2010 USD in 2018. Since its independence in 1971, the UAE’s economy has grown by nearly 231 times to 1.45 trillion AED in 2013. The non-oil trade has grown to 1.2 trillion AED, a growth by around 28 times from 1981 to 2012. Backed by the world’s seventh-largest oil deposits, and thanks to considerate investments combined with decided economic liberalism and firm Government control, the UAE has seen their real GDP more than triple in the last four decades. Nowadays the UAE is one of the world’s richest countries, with GDP per capita almost 80% higher than OECD average.
United Arab Emirates has a reputation of being a secure and tax-free destination for international companies
As impressive as economic growth has been in the UAE, the total population has increased from just around 550,000 in 1975 to close to 10 million in 2018. This growth is mainly due to the influx of foreign workers into the country, making the national population a minority. The UAE features a unique labour market system, in which residence in the UAE is conditional on stringent visa rules. This system is a major advantage in terms of macroeconomic stability, as labour supply adjusts quickly to demand throughout economic business cycles. This allows the Government to keep unemployment in the country on a very low level of less than 3%, and it also gives the Government more leeway in terms of macroeconomic policies – where other governments often need to make trade-offs between fighting unemployment and fighting inflation.
The UAE has been successfully diversifying its economy, particularly in Dubai, but still remains heavily reliant on revenues from petroleum and natural gas, which continue to play a central role in its economy, especially in Abu Dhabi. More than 85% of the UAE’s economy was based on the oil exports in 2009. While Abu Dhabi and other UAE emirates have remained relatively conservative in their approach to diversification, Dubai, which has far smaller oil reserves, was bolder in its diversification policy. In 2011, oil exports accounted for 77% of the UAE’s state budget.
United Arab Emirates Economic Indicators
United Arab Emirates GDP Growth Rate
The biggest sector of United Arab Emirates’ economy is services, which accounts for 40 percent of GDP. Within services the most important segments are: wholesale and retail trade and repairs (12 percent of GDP); real estate and business services (9 percent) and transport, communication and warehousing (8 percent). Oil and natural gas exploitation create 38 percent of the wealth. Construction and electricity, water and gas distribution contribute for 13 percent of the output and manufacturing for 8 percent. Agriculture, cattle ranching and fishing account for the remaining 1 percent of GDP.
United Arab Emirates Interest Rate
In the United Arab Emirates the interest rate decisions are taken by the Central Bank of the United Arab Emirates. The official interest rate since November 2007 is overnight repurchase rate.
United Arab Emirates Inflation Rate
In United Arab Emirates, the main components of the consumer price index are: Housing (34.1 percent of the total weight); Food and Soft Drinks (14.3 percent) and Transportation (14.6 percent). Education accounts for 7.7 percent; Miscellaneous Goods and Services for 6.3 percent; Furniture and Household Goods for 5.6 percent and Communications for 5.4 percent. Others include: Restaurants and Hotels (4 percent); Recreation and Culture (3.2 percent); Textiles, Clothing and Footwear (3.2 percent); Medical Care (1.4 percent) and Beverages and Tobacco (0.3 percent). The national index has a base of 100 as of 2014. .
United Arab Emirates Unemployment Rate
In the United Arab Emirates, the unemployment rate measures the number of people actively looking for a job as a percentage of the labour force. Unemployment Rate in the United Arab Emirates increased to 2.64 percent in 2019 from 2.57 percent in 2018.
United Arab Emirates Government Dept to GDP
Generally, Government debt as a percent of GDP is used by investors to measure a country ability to make future payments on its debt, thus affecting the country borrowing costs and government bond yields. The United Arab Emirates recorded a government debt equivalent to 18.60 percent of the country’s Gross Domestic Product in 2018.
United Arab Emirates Balance of Trade
United Arab Emirates has been recording trade surpluses since 2000, mostly due to shipments of oil and natural gas (40 percent of total exports). Main imports are: pearls and other precious metals and stones; machinery, sound recorders, reproducers and parts and transport vehicles. United Arab Emirates’ main trading partner is India (14 percent of total exports and 17 percent of imports). Others include: Japan, South Korea, China, United States and Iran. The United Arab Emirates recorded a trade surplus of 274600 AED Million in 2019.
United Arab Emirates Currency Dirham
The USDAED spot exchange rate specifies how much one currency, the USD, is currently worth in terms of the other, the AED.
United Arab Emirates Stock Market
The ADX General Index is a benchmark stock market index which tracks the performance of stocks listed on the Abu Dhabi Securities Exchange. It is a capitalization weighted index. The ADX General Index has a base value of 1000 as of June, 2001.
United Arab Emirates Ease of Doing Business
The United Arab Emirates is ranked 16 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of the United Arab Emirates deteriorated to 16 in 2019 from 11 in 2018. The Ease of doing business index ranks countries against each other based on how the regulatory environment is conducive to business operationstronger protections of property rights. Economies with a high rank (1 to 20) have simpler and more friendly regulations for businesses.
United Arab Emirates Consumer Confidence
Consumer Confidence in the United Arab Emirates decreased to 92 points in the second quarter of 2020 from 115 points in the first quarter of 2020.
In United Arab Emirates, the Consumer Confidence Index is part of The Nielsen Global Survey of Consumer Confidence and Spending Intentions. The survey is conducted every quarter by the Internet and measures the level of optimism that consumers have about job prospects, personal finances and spending intentions. Twice a year, the survey also includes questions regarding consumer habits and opinions on a number of other issues, ranging from climate change to online shopping and food safety. The index levels above 100 indicate optimism and below 100 indicate pessimism.
United Arab Emirates Corruption Rank
The United Arab Emirates is the 21 least corrupt nation out of 180 countries, according to the 2019 Corruption Perceptions Index reported by Transparency International. The Corruption Perceptions Index ranks countries and territories based on how corrupt their public sector is perceived to be. A country or territory’s rank indicates its position relative to the other countries and territories in the index.
United Arab Emirates Credit Rating
Standard & Poor’s credit rating for the United Arab Emirates stands at AA with stable outlook. Moody’s credit rating for the United Arab Emirates was last set at Aa2 with stable outlook. Fitch’s credit rating for the United Arab Emirates was last reported at AA with stable outlook. The United Arab Emirates is a federation of seven emirates: Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah, and Umm al-Quwain. And credit agencies often provide different ratings to each emirate member of the United Arab Emirates. At Trading Economics, we use Abu Dhabi, the UAE capital, to benchmark the UAE credit worthiness against other countries. In general, this credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of the United Arab Emirates thus having a big impact on every emirate borrowing costs. This page includes the government debt credit rating for the United Arab Emirates as reported by major credit rating agencies.
Taxation in the United Arab Emirates
The United Arab Emirates does not have any federal income tax. An income tax decree has been enacted by each Emirate, but in practice, the enforcement of these decrees is restricted to foreign banks and to oil companies.The UAE government implemented value added tax (VAT) in the country from January 1, 2018 at a standard rate of 5%
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Starting a Business
The UAE Government introduced Bashr integrated eService, which enables investors to establish their businesses in the UAE within 15 minutes through a unified online platform. This platform is connected with federal and local government entities, which provide commercial licence services. https://basher.gov.ae/invest/#/