Skip to main content

UAE diversification strategy lags despite growth in oil sector

The United Arab Emirates is struggling somewhat with its economic diversification project as oil prices remain relatively low.
Abu Dhabi's Crown Prince Sheikh Mohammed bin Zayed Al Nahyan and Chinese President Xi Jinpin applaud as they witness a signing ceremony at the Great Hall of the People in Beijing, Monday, July 22, 2019. Andy Wong/Pool via REUTERS - RC1F7C215B10

The United Arab Emirates is a leader in economic diversification across the Gulf Cooperation Council (GCC), but even the UAE is struggling to grow. The post-2014 lower oil-price environment continues to weigh down economic activity across the Gulf states. Tanker threats and tensions in the Persian Gulf may exacerbate already sluggish non-oil and private sector growth, making economic interests a motivating factor in possible Emirati de-escalation talks with Iran.

Oil is still king in the economies of the GCC states, and even its most diversified members take heed at a threat to their primary source of economic activity. There has been little silver lining to the increasing political risk in the Persian Gulf, as oil prices have been stubbornly low. Diversification efforts combined with fiscal reforms of reduced subsidies of fuel and electricity, new taxes and fees have failed to counterbalance the decline in oil revenues. The softer side of Gulf economies, non-oil GDP, is dependent on foreign investment, tourism and expatriate labor and is especially sensitive to political risk. The result is a stalemate in which diversification efforts lag and oil dependency deepens, but oil is even less reliable as a long-term economic growth strategy.

Access the Middle East news and analysis you can trust

Join our community of Middle East readers to experience all of Al-Monitor, including 24/7 news, analyses, memos, reports and newsletters.


Only $100 for annual access.