ECONOMIC DEVELOPMENT - UAE Interact

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76 UNITED ARAB EMIRATES YEARBOOK 2006ECONOMIC DEVELOPMENT77But prosperity is not merely a national issue since the UAE’s growth is inextricablylinked to regional and global conditions and, increasingly, to the existence ofbeneficial trading conditions. Free trade agreements, such as the FTA that hasbeen under negotiation with the United States, are expected to yield benefitsacross a broad front, leading to freer access to key markets while promotingtechnology transfers to the UAE’s private sector, boosting domestic industrialgrowth and hastening further economic diversification, thus helping to broadenthe economy. Such FTAs depend upon synergies in national economic policies.Based on constant prices for 2000, oil and natural gas production output grewby a relatively modest 2.9 per cent (limited by OPEC quotas), reaching Dh93.63billion in 2004, compared to Dh91.03 billion in 2003. However, when viewedat current prices the sector jumped by 33.8 per cent, from Dh92.14 billion toDh123.26 billion, tracking a 33.8 per cent increase in average oil prices in thatperiod. Taking the economy as a whole, the 7.4 per cent increase in GDP, measuredat 2000 constant prices, translated into a 17.8 per cent increase at current prices,with the GDP figure rising to Dh378.76 billion (US$103.2 billion) in 2004, comparedto Dh321.75 billion in 2003.The weighted average oil price in 2004 was US$36.10 per barrel, compared toUS$28.11 in 2003. In line with this, the value of oil exports increased by 34 per cent,from Dh81.2 billion in 2003 to Dh108.8 billion in 2004, while gas exports grewby 19.9 per cent to reach Dh17.2 billion. The export value of petroleum productsincreased by 16.7 per cent, reaching Dh15.2 billion. These increases were majorfactors in improving the overall balance of payments, achieving a surplus ofDh12.8 billion, compared to a surplus of Dh4.73 billion in 2003. The currentaccount balance showed an equally impressive increase, reaching Dh47.51 billionin 2004, compared to Dh27.73 billion in 2003, a 71 per cent rise.Continued development of the non-oil sector (9.4 per cent increase at constantprices and 11.2 per cent increase at current prices), reflects the Government’ssuccessful focus on economic diversification. The sector’s overall contribution toGDP remains high (71.7 per cent at constant prices and 67.4 per cent at currentprices). Whilst its overall role shows a small gain at constant prices, it is notsurprising, considering the sharp rise in oil prices, that there is a small decreasein the non-oil sector’s overall role in GDP when compared to its 2003 level on thebasis of current prices.When measured at constant (2000) prices the manufacturing sector showedthe highest growth rate among the non-oil sectors, rising from Dh39.2 billion in2003 to Dh45 billion in 2004, a 15 per cent increase. This was also reflected bya rise in its overall contribution to GDP from 13 per cent in 2003 to 14 per centin 2004. The manufacturing sector is closely linked to the oil and gas sector sincea key element is liquified gas and petroleum products. Thus the increase in refiningcapacity made a vital contribution to the manufacturing sector.Source: Central Bank of the UAE; Ministry of Planning; Customs Departments of Local GovernmentsSelected Economic IndicatorsPopulation (000) GDP in Current Prices (Dh billion) GDP at Constant 2000 Prices (Dh billion)Real GDP Growth Rate (%) Consumer Price Index (%) Employees (000)Final Consumption (%) Fixed Capital Formation (%) Total Exports & Re-Exports (Dh billiuon)Crude Oil Exports (Dh billion) Total Re-Exports (Dh billion) Total Imports (Dh billion)Trade Balance (Dh billion) Current Account Balance (Dh billion) Capital Account Balance (Dh billion)Balance of Payments Overall (Dh billion) Average Oil Price US$ per barrel) Average AED Exchange Rate (Dh per US$)2003 2004Population (000) 4,041 4,320GDP, in Current Prices, (Dh billion) 321.8 378.8GDP, at constant 1995 prices, (Dh billion) 301.3 323.6Real GDP Growth Rate (%) 11.9 7.4Changes in Consumer Price Index (%) 109.1 114.2Employees (000) 2,334 2,459Nominal Rate of Growth of Final Consumption (%) 10.5 14.1Nominal Rate of Growth of Fixed Capital Formation (%) 17.1 11.1Total Exports & Re-Exports (Dh billion) 1 246.56 303.90Crude Oil Exports (Dh billion) 81.22 108.79Total Re-Exports (Dh billion) 2 86.06 101.78Total Imports (CIF) (Dh billion) 3 191.24 226.18Trade Balance (FOB) (Dh billion) 78.26 104.86Current Account Balance (Dh billion) 27.73 47.51Capital and Financial Account Balance (Dh billion) -19.58 -21.21Balance of Payments Overall (Dh billion) +4.73 +12.83Average Oil Price (US$ Per Barrel) 28.11 36.10Dh Exchange Rate for each US Dollar 4 3.6725 3.6725* Preliminary estimates quoted in Central Bank Statistical Bulletin 23/ 41 Including Exports from Free Zones and Re-Export of Non-Monetary Gold.2 Including Re-Export of Non-Monetary Gold.3 Including Free Zones Imports and Non-Monetary Gold Imports.4 Effective Nov. 1997, the Dh Exchange Rate Has Been Adjusted to Dh3.6725 for Each US Dollar.
78 UNITED ARAB EMIRATES YEARBOOK 2006 ECONOMIC DEVELOPMENT79PUBLIC FINANCE 2004The Consolidated Government Finance AccountREVENUETotal revenues increased by 22.6 per cent in 2004 to Dh94.4 billion, against Dh77 billion in 2003, mainlydue to the increase in oil and gas earnings. Tax revenues (customs duties, other charges and revenues)increased by 31.4 per cent to Dh9.3 billion, compared to Dh7 billion in 2003, forming 9.8 per cent oftotal revenues. Customs revenues also rose by Dh591 million to reach Dh3 billion. Non-tax revenuesincreased by 21.7 per cent to Dh85.2 billion, against Dh70 billion in 2003, forming 90.2 per cent oftotal revenues. This was attributed to a rise of Dh16.6 billion (29.2 per cent) in receipts from oil andgas exports (Dh73.3 billion in 2004 against Dh56.7 billion in 2003). Likewise, profits of shareholdingcompanies rose by 13.2 per cent Dh3.3 billion in 2004, compared to Dh2.9 billion in 2003.EXPENDITUREExpenditure increased in 2004 by Dh3.8 billion (4.2 per cent) to Dh95.3 billion, against Dh91.4 billion in2003. Current expenditure constituted 84 per cent of total expenditure, realising Dh80 billion as opposedto Dh74.3 billion in 2003. Expenditure on salaries and wages rose by Dh325 million (2.1 per cent) toDh15.5 billion. Expenditure on goods and services also increased by Dh459 million to Dh24.3 billion.Expenditure on subsidies and transfers rose by Dh873 million (8.4 per cent) to Dh11.3 billion, and otherunclassified current expenditure increased by Dh4.1 billion (16.4 per cent) to Dh29 billion. Developmentexpenditure decreased by 3 per cent to Dh15.6 billion, against Dh16 billion in 2003. Meanwhile, at–Dh267 million, loans and equity participations declined by 123.2 per cent compared to 2003.THE DEFICITThe deficit narrowed by 94.1 per cent to Dh855 million in 2004, compared to a deficit of Dh14.4billion in 2003. This deficit was financed, in its entirety, by returns on government investments.MONETARY AND CREDIT POLICYDirham Exchange RateDue to its fixed peg to the US dollar, the dirham depreciated as a result of depreciation of the US dollaragainst most major currencies during 2004. Key depreciations were against the euro (9.2 per cent),the pound sterling (10.2 per cent), the Japanese yen (7.3 per cent), the Swiss franc (7.3 per cent) andthe SDR (IMF ‘Special Drawing Right’ basket of currencies) (5.5 per cent). The rate of exchange of thedirham remained unchanged against all GCC currencies at the end of 2004 compared to its rate atthe end of 2003.Dirham Exchange Rate Index(Foreign Currency Units Per Dirham) (2000=100)Currency 2000 2001 2002 2003 2004US Dollar 100.0 100.0 100.0 100.0 100.0Japanese Yen 105.0 123.0 121.8 112.9 104.7Euro 109.4 113.0 106.1 89.5 81.3Pound Sterling 106.3 112.0 106.8 98.7 88.6Swiss Franc 106.4 105.6 98.0 85.0 78.8SDR 104.0 107.8 106.0 98.1 92.7Millions of Dhs100,00080,00060,00040,00020,000TOTAL EXPENDITURETOTAL EXPENDITUREDEFICITTOTAL REVENUEDEFICIT02000 2001 2002 2003 2004Items In millions of Dh 2003* 2004**REVENUE 77,012 94,415Tax Revenue ...................................................................... 7,044 9,255Customs ........................................................................ 2,449 3,040Other ............................................................................ 4,595 6,215Non-Tax Revenue .............................................................. 69,968 85,160Oil and Gas ................................................................... 56,738 73,322Joint Stock Corporations ................................................ 2,935 3,322Other ............................................................................ 10,295 8,516EXPENDITURE 91,433 95,270Current Expenditure ............................................................ 74,253 79,986Salaries and Wages ........................................................ 15,159 15,484Goods and Services ........................................................ 23,801 24,260Subsidies and Transfers .................................................. 10,408 11,281Other Unclassified .......................................................... 24,885 28,961Development Expenditure ................................................... 16,028 15,551Loans and Equity Participation .......................................... 1,152 -267Local ............................................................................. -810 3,154Foreign .......................................................................... 1,962 -3,421Surplus (+) or Deficit (-) ............................................................. - 14,421 - 855Financing ............................................................................. 14,421 855Changes in net Government Deposits with Banks .......... 2,383 -1,574Other1 ........................................................................... 12,038 2,429Source: Central Bank Annual Report 2004 with data drawn from Ministry of Finance and Industry and Local Government Finance Departments*Adjusted data ** Preliminary data 1 Returns of government’s investments.
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