During the past five months, the UAE and its economy have experienced events that would leave most other countries quite damaged. The Iran war – arguably the Gulf's biggest challenge since Covid-19 – has disrupted energy, shipping and investment as well as shaking confidence across the region. That the UAE’s success has been built on openness and connectivity made such upheaval a challenge for a number of sectors. However, new data paints a picture of an economy and society that weathered the storm and rebounded.
Business activity in the UAE's non-oil private sector climbed to a four-month high in July, while employment numbers rose, as companies continue to bounce back. The seasonally adjusted S&P Global UAE Purchasing Managers' Index climbed to 52.7 from 50.8 in June. A reading above 50 indicates growth in economic activity, while one below indicates a contraction. Meanwhile, Dubai's population has rebounded since the start of the war, with official figures showing 157,000 more people living in the emirate compared with the start of the year.
A hasty interpretation would be to ascribe this to national resilience and move on. It is more instructive to look closer and see how, far from being automatic, such recovery is the result of policy choices and strategic decisions made over years, not improvised in recent months.
On the macroeconomic level, the fact that the Emirates entered this turmoil with strong fiscal buffers and a well-established, diversified growth model meant that external shocks, as significant as they are, were manageable. Contingency plans in the form of alternative import and export routes showed how adaptability was part of the country’s economic toolkit.
Undoubtedly, the experiences of industries and people varied in the past few months. Some tightened budgets and were anxious about uncertainty in a volatile period. However, the micro-level response to these issues is the other side of the resilience coin. Measures such as flexible rental arrangements in Dubai, rent stabilisation in Abu Dhabi, and incentives to support tourism and consumer spending helped steady demand. Established labour market policies have given much-needed breathing space. Visa grace periods that were extended over the years gave people time to find new employment or make other plans. Unemployment insurance schemes gave workers time to adjust rather than pushing them towards an abrupt exit. In regionally uncertain times, such policies help maintain confidence in the underlying reality that the UAE remains a stable place to live and work.
That confidence is reflected in the data released this week, in addition to the strategic investments made in energy, logistics and cultural sectors. Much about the future is unclear, even as reports emerge this week about a purported deal to stabilise the Strait of Hormuz and end the war. The experience of the months since February 28 is a reminder that fortitude is something to be built in advance.
