The UAE has honed in on growth and residents’ wellbeing in its 2022 budget.
The government approved a budget of AED58.9 billion for the country, up just slightly from the AED58bn approved in 2021 in the wake of Covid-19 which decimated global oil markets, from which the UAE derives some 30 percent of its gross domestic product from.
“The UAE federal government’s budget allocation over the next four years demonstrates that as a country, the UAE is maturing and refocussing its efforts not only on growth, but also the wellbeing of residents,” said Scott Cairns, founder and managing director of Creation Business Consultants.
The total budget allocation for 2022-2026 is AED290bn. Most of the spending is going to development and social benefits, according to the state-run WAM news agency. Nearly 16 percent will go to higher education, 6 percent to social affairs, 8.4 percent to the health sector and 3.8 percent to infrastructure and economic resources.
“With the small decline in spending in 2022, the budget suggests a modest pulling back of fiscal support at the federal level as the economy recovers from the Covid-19 crisis and a similar level of spending seems likely for the next five years,” Scott Livermore, ICAEW economic advisor and chief economist at Oxford Economics, told Arabian Business.
Social spending is a key policy lever to support and promote inclusive growth, according to the International Monetary Fund (IMF).
“Ensuring an adequate level of public spending on education, health, and social protection and improving the efficiency of this spending are important for building a healthy and productive workforce and, more broadly, an inclusive society,” IMF analysis found.
Covid-19 recovery in the UAE continues with restrictions easing and economic support programs launched during the pandemic winding down.
“It would appear that the federal government is positioning the UAE to emerge on the other side of the pandemic much earlier than other countries around the world – which is a testament to how well the country has weathered the Covid-19 storm,” Cairns said.
Scott Cairns, founder and managing director of Creation Business Consultants.
The country relies on tourism for around 12 percent of its GDP. Global lockdowns and travel restrictions slashed spending on travel and tourism, although domestically, the UAE’s tourism market was able to recover quickly as staycations and domestic travel helped the sector weather the storm.
The federal budget only accounts for around 15-16 percent of total government spending, with individual emirates driving their own growth.
“The budget has limited immediate implications for the diversification agenda as only a small proportion is allocated to economy and infrastructure. However, the recent bond issuance at the federal level and likely further issuances may indicate that there will be more federal level initiatives to complement those at the emirate level,” Livermore said.
The UAE, now on the other side of the pandemic – with Abu Dhabi Crown Prince Sheikh Mohamed bin Zayed Al Nahyan saying the country “overcame the Covid-19 crisis” – is once again looking to attract talent from around the globe.
And, according to Cairns, the new budget should help with that. “With previous announcements over 2021 concentrating more on attracting talent and FDI, this message takes the friendly rivalry with KSA one step further to enhance lifestyle and social benefits of UAE residents,” he said.
“Companies will not only be considering the financial incentives when deciding on future expansion locations, but also the social incentives for their top talent to move and reside in a country.”
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