The United Arab Emirates has worked hard to diversify its economy in recent years. These efforts have pushed the contributions of the non-oil sector to about 70% of the country’s gross domestic product (GDP) according to its ministry of economy. But in common with other commodity exporters, the UAE has not been immune from the fall in global oil prices. With the price of crude oil expected to remain depressed over the medium term, the country’s growth model is now being put to the test.
The International Monetary Fund expects the UAE's GDP growth to slow to 3% in 2015, a marked decrease from the 4.6% recorded in 2014. In this lower growth environment, government revenues – some 60% of which are generated from the oil and gas sector – are expected to decline by about 20% in 2015. Meanwhile, the country’s fiscal balance is likely to turn negative in 2015 and 2016, though substantial financial reserves will offset the impact of these deficits in the coming years.
