Editor’s Note
The UAE’s non-oil trade growth highlights progress in economic diversification, yet underlying imbalances underscore the ongoing challenge of translating trade volume into sustainable, broad-based economic development.
According to Sheikh Mohammed bin Rashid Al Maktoum, Ruler of Dubai and Vice President of the UAE Federation, the value of the UAE’s non-hydrocarbon foreign trade reached $379 billion in the first half of 2024, a year-on-year increase of 11.2%. While these figures demonstrate progress in economic diversification and the UAE’s growing role in global trade, particularly with Asia, the country’s foreign trade still exhibits imbalances and has not yet driven growth in the local industrial sector.
The UAE, the world’s 11th largest goods exporter, traditionally records a substantial trade surplus of about 25% of GDP (+$99.7 billion in 2023). The country’s exports have diversified significantly over the past decade: hydrocarbon sales accounted for 15% of total exports in 2023, half the share from ten years ago. The UAE has the lowest share of petroleum products in total exports among GCC countries. With volatile oil prices, increasing non-oil trade is indeed a priority for the Emirati government.
Non-hydrocarbon trade is indeed growing strongly: it now stands at $737 billion, compared to $498 billion in 2017. However, this increase is primarily linked to a marked rise in imports, which have grown by an average of 10% annually since 2017. Consequently, even though Emirati non-oil goods exports are increasing rapidly (+17% in 2023), the non-hydrocarbon trade balance tends to deteriorate in value (the non-oil trade deficit increased by 4.7% in 2023).
Furthermore, non-hydrocarbon exports largely consist of re-exports. The UAE serves as a logistics platform for consumer goods imported from East Asia (notably mobile phones, machinery, and electronics) and resold in the Middle East and India. Dubai is also a major hub for the diamond trade, typically imported from Africa and re-exported without processing.
They also partly explain the high volume of imports destined for the UAE.
Goods exports themselves remain dominated by the gold sector, which is imported and then processed to varying degrees in the UAE, representing 42.1% of the country’s exports (excluding hydrocarbons and re-exports). Therefore, the diversification of Emirati foreign trade currently relies more on the country’s positioning as a commercial hub than on the development of a local industry capable of exporting.
However, since 2021, the Emirati government has implemented an industrial policy aimed at developing local production of goods and their export internationally. According to the strategy of the Ministry of Industry and Advanced Technology, titled “Operation 300 Billion,” public investment, coupled with financing facilities, is intended to triple the UAE’s industrial GDP by 2030. The UAE also aims to strengthen its position as a global hub through the signing of Comprehensive Economic Partnership Agreements (CEPAs), which have multiplied since 2021. The UAE has thus concluded trade treaties with, among others, India, Turkey, Indonesia, and, more recently, Jordan.
Finally, the UAE’s services sector, a spearhead of economic diversification, is largely in surplus (+€23.2 billion), driven by the dynamism of the tourism sector, particularly in Dubai. This helps offset the trade deficit, allowing the UAE’s non-hydrocarbon balance of payments to remain positive in 2023, generating a surplus of €13 billion.