Is the UAE the Most Attractive MENA Economy for Investors?
The development and diversification of the Middle East economy has been pronounced in recent times, with this most evident in the number of international sporting events held in regions such as the UAE.
This included the proposed super-fight between Anthony Joshua and Tyson Fury, which has now been postponed but would have been hosted in Saudi Arabia.
There’s no doubt that the UAE is at the epi-centre of the MENA economy, with recent figures from consulting firm Kearney revealing that the region is increasingly well-placed to attract significant investment over the course of the next three years.
We’ll explore this further below, while appraising the most attractive investment options within the region.
What do the Numbers Tell Us?
Kearney’s 2021 Foreign Direct Investment (FDI) Confidence Index (which is compiled annually and ranks regions according to their attractiveness amongst overseas investors) found that the UAE moved up from 19th place globally to 15th.
This came against the backdrop of the coronavirus pandemic, of course, with the UAE one of just five countries to achieve a higher ranking this year in an increasingly competitive global FDI value proposition.
This success is also borne out by the region’s economic figures, which suggest that the UAE is expected to post growth of 2.5% this year, after contracting sharply by 5.8% as a result of Covid-19.
Interestingly, last year’s decline was partially due to the region’s sustained economic diversification process, with increasingly influential non-oil sectors such as tourism taking a significant hit through 2020.
According to the UAE central bank, real non-hydrocarbon gross domestic product declined by 5.7% last year, with this issue exacerbated by the declining price of oil and a sharp drop in international demand.
However, non-oil GDP is expected to grow by 3.6% in 2021, as international tourism gradually resumes and other industries also receive a considerable boost. At the same time, oil GDP is expected to remain steady for the remainder of the year, thanks in part to the widespread production cuts agreed by OPEC.
What are the Most Attractive Options for Investors in the UAE?
As recently as 2018, the UAE (which is categorised as the second-largest economy in the MENA region) received $10.3 billion in foreign direct investment, mainly through trading activities, real estate and insurance.
In addition to a rapidly growing and diversified economy, this trend has been driven by the creation of an expanding range of asset classes for investors to target, with currencies, stock and indexes particularly appealing in the region.
For example, investors are increasingly inclined to target currency pairs and regional indexes through CFDs, which are speculative vehicles that enable individuals to profit without assuming ownership of the underlying asset.
This combination of assets and investment vehicles also allow for instant diversification, enabling investors to minimise risk and exposure without compromising on their trading choices.
The key is to think carefully when selecting asset classes and strive to create a diversified portfolio, ideally one that reflects the biggest growth industries in the UAE and recognises how the region continues to evolve economically over time.
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