The United Arab Emirates is one of the more stable Gulf states and attracts a number of our clients. It has a small, wealthy population, no history of terrorism, and no sectarian tensions to speak of. The country is also supported by strong relations with the US. The UAE has a low level of democracy and transparency, but heavy oil-funded spending on security and social benefits help ensure there are few real challenges.

We ensure our clients make sound investment decisions in the UAE, using our risk-assessed total analysis model. Our teams keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. Our expert views are supported by our interactive data and forecasting. We also provide in-depth analysis on 21 of the UAE’s most important industries. Our analysts will ensure you find doing business in the UAE is made easy.

Country Risk

United Arab Emirates Country Risk

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Core Views

  • Lower oil prices will hit growth as government spending and consumer confidence falls. We forecast real GDP growth at 2.8% and 2.6% in 2016 and 2017 from an estimated 4.0% in 2015

  • Dubai will see an even sharper slowdown as discretionary spending from the rest of the Gulf, and the impact of weaker currencies in China and India take their toll on investment ad spending.

  • Credit growth to the private sector will remain relatively slow through 2016 as commercial banks continue to increase provisioning against potential loan losses due to the debt funding cliff.

Key Risks

  • Any attack by Islamist militants would result in a fundamental reappraisal of both the UAE's, and the wider region, risk profile.

  • Any...

United Arab Emirates Operational Risk Coverage (9)

United Arab Emirates Operational Risk

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BMI View: The United Arab Emirates (UAE) is one of the most attractive destinations for investment in the Middle East and North Africa (MENA) given its integrated supply chain network, openness to international trade and foreign investment and liberal tax regime. The country stands out among its regional peers due to its stable and secure operating environment which offers a relatively low risk of crime and terrorism and strong legal protection for foreign investors. The only major risks stem from the labour market, as the small domestic population offers limited appeal, while the vast pool of migrant workers is largely unavailable due to restrictive laws regarding employment of expatriates. Nevertheless, the country's broad-based appeal to investors means that it is a regional...

United Arab Emirates Crime & Security

BMI View:

BMI View: The UAE's crime and security environment is the most conducive to the secure and safe operation of a business in the MENA region. With relatively low crime rates and highly capable police force, businesses can be assured of efficient crime prevention, thus mitigating costs for insurance and additional security measures. Simultaneously, although the region is notoriously unstable, the UAE faces limited risk of terrorist attacks and enjoys open diplomatic channels with neighbouring states within the MENA region. The UAE has a robust security force and well-equipped military. There is a limited presence of organised crime, and although is some risk of exposure to financial...

United Arab Emirates Labour Market

BMI View:

BMI View: Businesses in the UAE must be aware that they will be required to import foreign workers for a wide variety of positions ranging from low-skilled construction labourers to highly-skilled oil and gas workers. This is due to the country's small population, which is relatively poorly educated and remains predominantly employed in the public sector. This entails some significant risks to businesses, mainly stemming from the bureaucratic hurdles and costs associated with importing foreign staff, the lack of flexibility in recruiting from the vast migrant labour pool, and the growing risk of more stringent restrictions on the employment of expatriates. Nevertheless, the UAE's labour market also offers some advantages,...

United Arab Emirates Logistics

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BMI View: The UAE has developed a role as a key link in the global supply chain, with its ports and airports serving as major hubs on international trade routes between Europe and Asia. Robust government investment in transport infrastructure, the strategic development of free zones as well as the minimisation of trade bureaucracy ensure that the country offers world class facilities at its air and maritime terminals. Congestion remains a key concern for internal supply chains, as there are no alternative options to the road network, however, ongoing investment...

United Arab Emirates Trade & Investment

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The United Arab Emirates is one of the most attractive destinations for trade and investment in the Middle East and North Africa (MENA) region. The country possesses a well defined and implemented legislative environment, as well as strong intellectual property rights. We see little in the way of direct trade and investment risk, particularly given government support of pro-market policies.

We have given the UAE a score of 66.3 out of 100 in our Trade and Investment Risks Index, placing the country first out of the 18 countries covered in the MENA region. As one of the largest Arab economies, as well as being well-placed for trade elsewhere, the UAE offers a large market to foreign investors. Moreover, a low tax regime and relatively strong intellectual property rights help to bolster it score. Furthermore, compared with the rest of the Gulf Cooperation Council, the UAE has many incentives to foreign direct investment (FDI) and its tax and...

United Arab Emirates Industry Coverage (22)

Autos

United Arab Emirates Autos

BMI View:

BMI View: A combination of a slowing economy, low oil prices and higher local interest rates has led to BMI adopting a more cautious stance towards the new vehicle sales market in 2016. We expect just 1.0% sales growth for the sector this year.

Total Vehicle Sales, United Arab Emirates
(2014-20)
BMI/Industry sources

Key Views

  • Over 2016-...

Commercial Banking

United Arab Emirates Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

Consumer Electronics

United Arab Emirates Consumer Electronics

BMI View:

BMI View: The UAE is a lucrative consumer electronics devices market where high incomes and a culture of consumption are reflected in short replacement cycles and a large share for premium brands. This will continue over the medium term, but growth prospects are limited by the economic downturn as a result of the fall in oil prices in 2014 and 2015. This has filtered through to lower confidence levels and could impact the economy further over the medium term. Reflecting this, we downgraded our forecast for devices spending in Q116 and now envisage a compound annual growth rate of just 0.3% 2016-2019 to USD4.6bn. While the market as a whole has a subdued outlook there are areas of stronger performance, for instance hybrid notebooks in the retail market, and TV set sales as hotel capacity has expanded ahead of the 2020 World Expo....

Defence & Security

United Arab Emirates Defence & Security

BMI View:

BMI View: The UAE's local defence industry is still in the early stages of development, and as such, domestic companies rely on assistance from foreign firms to manufacture sophisticated military equipment. The armed forces' requirements for high-tech naval, air power, missile and surveillance products are therefore predominantly met through imports. However, the government - as part of its economic diversification strategy - is working to expand the local defence industrial base, and is actively encouraging joint ventures (JVs) between international companies and UAE-based entities. The country ranks in the top 15 globally for the size of its defence budget, and we expect further spending growth over our forecast period to 2025, driven by the rising threat from...

Food & Drink

United Arab Emirates Food & Drink

BMI View:

BMI View: The UAE's consumer outlook remains bright despite slowing economic growth in 2016. The country's large high-income consumer base will drive consumer spending, and the tourism and construction sector will bolster consumer confidence. The MGR segment will benefit from growing demand for smaller convenience outlets on the back of growing investment in residential projects outside capital cities.

Food and Drink Spending
(2013-2020)
...

Freight Transport

United Arab Emirates Freight Transport

BMI View:

BMI View: We expect continued robust growth across the UAE's freight modes in the near term and over our medium-term forecast period to 2020. Massive investment into freight transport infrastructure - not least the development of the UAE's nascent rail network - will ensure that growth in freight volumes continues far beyond our forecast period. This will be driven not only by domestic demand, but will also be massively informed by the UAE's becoming one of the world's foremost global transhipment hubs.

Looking at the UAE's domestic trade growth prospects, we are bullish in both real and nominal terms. Looking first at real growth, we forecast an expansion of 5.1% in total trade in 2016, followed by a further 4.9% in 2017. Imports will outpace exports, at 6.2% to 4.0% in 2016 and 6.0% to 3.7% in 2017. This...

United Arab Emirates Freight Transport

BMI View:

BMI View: Growth across the UAE's freight modes and shipping sector is set to be strong in 2016 and over the course of our forecast period. Continued economic expansion, despite lower oil prices, will maintain healthy consumption and consequently trade levels. Oil exports will return to positive growth this year driving throughput, particularly at ports. A growing private healthcare industry and e-commerce business are boosting air freight which will be the fastest growing mode over the medium term. Nonetheless, road will continue to dominate in light of an absence of inland waterways and...

Information Technology

United Arab Emirates Information Technology

BMI View:

BMI View: The UAE IT market contracted in 2015 as a downturn in hardware spending dragged down the overall market. We envisage a return to growth in 2016 and the growth rate to remain subdued but stable over the medium term. Our forecast envisages a CAGR of 3.6% over 2015-2019 to AED19.2bn in 2019. The hardware market will be challenging as a result of market maturity and economic uncertainty, but we have a brighter outlook for software and services as enterprise and government modernisation initiatives continue. The areas of strongest growth will be cloud services and IoT solutions adoptions, with the UAE a regional leader for both.

Latest Updates & Industry...

Infrastructure

United Arab Emirates Infrastructure

BMI View:

BMI View: We are maintaining our forecast for solid construction industry growth over our forecast period as investors seeks to capitalise on the infrastructure opportunities in the run up to Expo 2020 hosted by Dubai - particularly in the non-residential and transport sectors. Also supporting interest in Dubai's market is its more diverse economy, which has kept it fairly insulated against the commodities price drop that dampened growth in the more oil-dependent Abu Dhabi.

Forecast & Latest Updates

  • We are forecasting 6.6% real growth over 2016 and an annual average of 6.1% over the first half of our forecast period up to 2020. Dubai's preparation to host Expo 2020 is providing major growth opportunities...

Insurance

United Arab Emirates Insurance

BMI View:

BMI View: The UAE's insurance sector will grow at a solid, if slowing, pace over the next five years, on the back of generally stable economic fundamentals and demand from the large expatriate workforce. We see the mild consolidation as a consequence of heavy competition in the sector which is putting downward pressure on premium prices. However, growth will be pretty strong over 2016-2017, due to two key drivers. Firstly, there will be a bounce back, after a mild overall contraction in gross premiums written in 2015. The second factor will be a surge in health insurance premiums due to recent legislation, which makes health insurance compulsory for foreign residents. Life insurance is less established, and again demand is primarily driven by foreign workers unable to access generous state benefits provided to nationals.

Headline Insurance...

Medical Devices

United Arab Emirates Medical Devices

BMI View:

BMI Industry View: The United Arab Emirates will remain an attractive market and an important regional hub, despite moderate market growth of 9.3% over the forecast period. Population growth, a changing epidemiological profile, a growing medical tourism industry, continuous healthcare infrastructure developments, an expanding health insurance and increasing health expenditure will be key market drivers. With rising healthcare costs and a period of lower oil prices, the government will attempt to increase private sector participation to stave off the erosion of state revenues.

Headline Industry Forecasts...

Oil & Gas

United Arab Emirates Oil & Gas

BMI View:

BMI View : The UAE's oil and gas production is set for a sustained, albeit unimpressive growth over the next five years. The consumption outlook for both oil and gas is strong, although ongoing subsidy reform will somewhat temper growth. The UAE will grow increasingly dependent on imports of pipeline gas and LNG across the forecast period. However, it is set to become a net exporter of fuels from 2016 due to the expansion at Ruwais facility.

Headline Forecasts (United Arab Emirates 2014-2020)
2014e 2015e 2016f ...

Petrochemicals

United Arab Emirates Petrochemicals

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The UAE is set to face a challenging year as it doubles output at the massive Borouge petrochemicals complex. The combination of an end to sanctions on Iran, a Chinese slowdown and Saudi Arabia's opening of its massive Sadara complex will work to keep petrochemicals prices low. Meanwhile, the UAE's dominant ethane feedstock will struggle to compete with falling oil-derived naphtha feedstock used by rivals in Asia and Europe.

The Gulf Cooperation Council (GCC) is seeing a slowdown in petrochemicals output growth, which fell to 7.5% in 2015 from 11% CAGR in 2004-2014, and is set to fall to 3.2% on average over the next five years. Constraints in gas supply have been blamed and this tightness in the gas market is leading to upward pressure on ethane costs.

Ethane availability and feedstock pricing will remain key to the growth of the UAE's petrochemical industry. Rising feedstock prices, limited...

Pharmaceuticals & Healthcare

United Arab Emirates Pharmaceuticals & Healthcare

BMI View:

BMI View: We believe the UAE's economic slowdown, as a result of low oil prices, will lead to further medicine price cuts being implemented by the government in the coming years. However, the increasing demand for high quality treatments and healthcare services will continue to drive growth - particularly in the private healthcare sector - as mandatory health insurance schemes gain traction. As this trend plays out, the rollout of compulsory health schemes and privately funded healthcare infrastructure projects will boost revenue-earning opportunities for drugmakers in the country. As such, the UAE will remain one of the most attractive pharmaceutical markets in the Middle East.

Headline Expenditure Projections

  • Pharmaceuticals: AED10.77bn (USD2.93bn) in 2015 to...

Power

United Arab Emirates Power

BMI View:

BMI View: This quarter our forecasts remain virtually unchanged, and we continue to hold an upbeat outlook for the UAE power sector - this is driven by the government's efforts to expand its power capacity. As corroborated by recent developments, we continue to expect the UAE to focus on expanding its nascent nuclear and solar industries, which will result in these two sectors making a much...

Real Estate

United Arab Emirates Real Estate

BMI View:

BMI View: Despite external pressures, demand in the commercial real estate industry is rising. Premium units in the office and retail sub-sectors are witnessing further investor interest; whilst expansion plans in industrial real estate could see rentals rise. We therefore hold optimism for commercial sector growth over 2016, although advice vigilance in light of falling oil prices that will stretch the economy.

The United Arab Emirates holds economic strength through prominent sovereign wealth and further diversification from oil related sectors into contemporary industries over the past few years, more so than the neighbouring Gulf states, with over 40% of GDP contribution coming form services. This indicates resilience to debilitating effects from the global economic cool down, a result of the fiscal struggles in China (a major trade partner) that has undoubtedly led the Arab nation to adopt...

Renewables

United Arab Emirates Renewables

BMI View:

BMI View: We continue to see the UAE as a hotspot for solar power in the GCC over the next decade, due to good climatic conditions, strong government support and an increasing cost-competitiveness of solar in the country's power sector. Federal aims to lower the reliance on natural gas through the development of cleaner sources of power, amid strong power consumption growth, lends further support to this view.

Renewables Headline Forecasts (United Arab Emirates 2015-2021)
2015e 2016f 2017f ...

Retail

United Arab Emirates Retail

BMI View:

BMI View: We retain optimistic growth forecasts for the UAE's retail market. The next four years leading to Dubai Expo 2020 will give a boost to the economic diversification, as gargantuan infrastructural and private projects pick up steam. Consumer confidence is likely to remain intact and inbound tourism is set to persist, both of which will continue rewarding retailers with unparalleled opportunities until 2019.

The UAE is highly reliant on oil revenue; as a result, the fall in oil prices during the end of 2014 and beginning of 2015 resulted in a damage to the UAE economy. After a shock, the real GDP increased by 3.9% in 2014, a marked improvement from growth of just 1.6% in 2010. We expect to see real GDP growth reach 4.0% in 2015 and this will bode well for growth in the UAE's retail...

Shipping

United Arab Emirates Shipping

BMI View:

BMI View: The UAE's shipping sector, one of the best developed and most important in the world, will continue to expand rapidly in 2016 and over the medium term. The Dubai port of Jebel Ali is the ninth largest in the world in terms of container throughput, owing largely to transhipment volumes, while the Abu Dhabi facility of Port Khalifa, only launched in late 2012, is expanding rapidly thanks to the KIZAD industrial zone being developed alongside it. It is due to these different sources of growth that we expect Khalifa's growth to far outpace Jebel Ali's in 2016 and beyond. Aside from the base effects of Khalifa still being a relatively newly launched facility, Jebel Ali's reliance on transhipment trade will negatively impact it given our expectation of rocky global growth in 2016, with the eurozone in particular not looking especially healthy.

...

Telecommunications

United Arab Emirates Telecommunications

BMI View:

BMI View: Our outlook for the UAE telecommunications market remains positive. The market benefits from having strong GDP per capita, high disposable incomes and a strong influx of migrants. Despite having a mature market and a very high penetration rate, we expect positive growth to continue throughout our five-year forecast to 2020.The country's two network operators, Etisalat and du, compete aggressively with one another and are investing significantly in technological innovation, capital investments as well as the development of new products and services. We believe that the high degree of ...

Tourism

United Arab Emirates Tourism

BMI View:

BMI View: Tourism in the UAE will continue its trend of strong growth over the coming years. The country, already seeing high number of business travellers and high-end tourists, is looking to diversify and cater for a greater share of the market. New mid-market and budget accommodation is planned by many of the major domestic and international hotel chains hoping to encourage families and younger travellers to the country. With strong governmental support, a relatively peaceful political environment and significant investment from both home and abroad, the tourism sector in the UAE will present plenty of opportunities over the forecast period.

Key Forecasts (United Arab Emirates 2013-2020)
2013e ...

Water

United Arab Emirates Water

BMI View:

BMI View:  

We have substantially expanded our forecasts this quarter to include a number of new indicators. This data has, in turn, impacted our existing forecasts. Our extraction forecast has been upgraded following the addition of desalinated water production forecasts, a sector where we anticipate strong growth over the coming years. In addition, we have expanded our wastewater forecasts, and have good growth projections for treated wastewater, which will in turn augment the water resources available for consumption, as we anticipate treated wastewater can cater to much of the industrial and agricultural requirements, freeing up freshwater and desalinated water supplies for domestic consumers.

We expect that desalination will continue to provide the lion's share of the country's water supplies. There are concerns that ground water resources will disappear entirely...

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