Economic overview
The United Arab Emirates (UAE) comprises seven emirates, but Abu Dhabi and Dubai are by far the most important. Together they’re responsible for more than 60% of the country’s economic output. A welcoming business environment, openness to investment and trade and an efficient labor market make the UAE an attractive location for foreign investment. It has one of the most diversified economies in the region, but the oil and gas sector still accounts for about a third of gross domestic product. The UAE has the world’s seventh largest oil reserves.
Weaker oil prices continue to weigh on the UAE’s economic outlook. Following GDP growth of 4.6% in 2014, Oxford Economics expects annual growth to stay below 3% for 2015-2017. Beyond 2017, industrial diversification and Dubai’s investment in high-quality infrastructure should offset the effect of oil prices, allowing economic growth to head back toward 4%.
Business travel industry insight
With 15 million international visitors, the UAE was the Middle East’s second most popular tourist destination in 2015, after Saudi Arabia. Close to 12 million people visited Dubai, with another 2.5 million visitors to Abu Dhabi. Dubai’s hosting of the World Expo in 2020 should lift UAE visitor numbers above 21 million over the next five years. After Kuwait and Saudi Arabia, the UAE is the region’s third-largest business travel market. Inbound visitors account for 60% of spending on business travel. Over the next five years, annual business travel spending growth should average 6%—a growth rate three times faster than that of Kuwait or Saudi Arabia.
International hotel chains are well-represented in the UAE and continue to invest as the World Expo approaches. Dubai dominates both current supply and the future pipeline with more than 20 hotels earmarked for opening in 2017 and 2018. Little hotel development is planned elsewhere in the UAE.
The UAE is home to two of the world’s fastest growing airlines: Dubai-based Emirates and Abu Dhabi’s Etihad Airways. Both operate comprehensive networks from their Gulf hubs. Other UAE-based airlines include low-cost carriers Air Arabia and Flydubai, as well as smaller airlines like RAK Airways.
Opportunities
- The UAE’s role as a regional trade and investment hub positions it to benefit from the lifting of economic sanctions on its neighbor Iran.
- Government efforts to support industrial diversification toward a knowledge-based economy should encourage business investment.
- Massive investment in tourism infrastructure and hotels to prepare for the World Expo will ensure the UAE’s remains a prime destination for years to come.
Challenges
- Growth in the UAE’s non-oil sector is losing momentum, as falling oil prices weaken consumer and business sentiment.
- Low oil prices have slowed private sector lending, encouraged growth in deposits and weakened the stock market. These developments point to a slowdown in investment.
- To keep development on track, the UAE must make progress on foreign ownership and bankruptcy laws, as well as on financial regulation.
BCD Travel’s Research & Intelligence experts translate the trends driving international business growth in new markets. Talk to your account manager about how BCD Travel can support your company’s growth and get your travelers where they need to be across the globe.
