Low oil price will not affect UAE economy

Experts recently announced that oil prices would decline even further because China’s oil demand has decreased and the amounts of oil in storage have gone up. After the announcement, several experts stated that the decline in oil prices would bring an economic catastrophe to oil-dependent countries. 

On the other hand, others believe it is highly unlikely the price of oil will plunge to US$20 per barrel. According to the USA benchmark, the West Texas Intermediate, the price of oil per barrel will be around $38 in about a month and will climb to $45 in the following year.

On the one hand, some argue that in the case that the price one of the UAE’s export partners were to decrease, the economy of the UAE would not be influenced negatively as it is strong and healthy. On the other hand, it is significant to consider the wider picture and how a decline in prices would influence the country in the long run.

Despite the international and regional economic environment, the UAE non-oil sector remains unaffected. The Transforming Our World: the 2030 Agenda for Sustainable Development project is founded on five key factors which are planet, peace, partnership, people and peace. The international project strives for a world where production and consumption as well as the consumption of natural resources (air, land, rivers, oceans, seas and lakes) remain sustainable.

Besides the five key factors that make up the Transforming Our World: the 2030 Agenda for Sustainable Development, other significant features have been added such as placing the environment in the centre of sustainable development and growth, educating the public of the benefits sustainable development carries as well as allowing women to gain more power and recognising their abilities.

How are all the aforementioned points linked to the price of oil? Ever since Abu Dhabi first started to export oil back in the 1960s, the UAE has focused on diversifying its economy. On the one hand, the UAE has been successful in diversifying its economy, in comparison to other GCC countries. On the other hand, the UAE economy is still largely dependent on oil. Furthermore, the fact that the UAE GDP has risen significantly has meant the country’s private sector, which is mainly dominated by foreign labour, has grown while at the same time its public sector has served as a significant employment source for Emiratis.

Despite low oil prices being the new norm, the UAE government has taken brave measures that reveal its general confidence that the UAE economy is equipped to become more competitive. The UAE government has saved a lot of money from its decision to deregulate petrol. Furthermore, when and if the UAE introduces a broader Corporate Tax or GCC countries implement a VAT, the UAE government will generate more revenue. Even though oil profits will remain significant to the UAE government, the national economy will remain strong due to the fact it has cut down on expenditure and increased the revenue it receives from tax. In this way, the UAE government will have the ability to develop and support the private sectors, including the services and manufacturing industries which are the main sources of employment. Likewise, businesspeople will be motivated to generate more profits which will lead to a sustainable economy.  

The GCC countries have developed their infrastructure due to the production of oil. Currently, the GCC states have high-quality airports, pots, roads as well as top rated social and telecommunication infrastructures which will attract more investments and opportunities to expand.

The UAE non-oil based economy reveals the county’s future. That is, an economy based on regional intellectual capital and technology as well as a country that puts to use all its resources and offers opportunities to all its residents.