UAE Oil Reliance at Multi-Year High Despite Lower Production

(Bloomberg) -- Oil’s share in the United Arab Emirates’ economy last year spiked to the highest since 2016 even though crude production fell around 18% on an annual basis, a federal-bond prospectus showed Monday. 

Oil accounted for about 29% of gross domestic product in 2020, compared with 25% during the previous year. While the reason for the rise is unclear, the spread of Covid-19 last year took a toll on many of the country’s businesses, with private-sector activity dropping to an all-time low. 

Countries in the region have been trying to prepare for a post-oil era, with economic diversification efforts being led in Saudi Arabia, Kuwait and Oman. The UAE’s economy has distinguished itself through Dubai, the Middle East’s business hub, which depends mainly on the private sector.

“The Federal Government has a long-term strategy of diversifying the UAE’s economy away from its reliance on oil,” according to the prospectus, “however, there can be no assurance that the UAE’s efforts to diversify its economy and reduce its dependence on oil will be completely successful.” 

The UAE is now marketing the first bond sale in its 50-year history as a combined federation, joining the rush of emerging-market borrowers tapping investors before the Federal Reserve starts winding down its pandemic stimulus. 

This year, oil GDP is expected to contract 1 percentage point. The non-oil economy is now seen growing 3.8%.

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