GENERAL ECONOMIC TRENDS
Whilst the increasingly diverse economic structure and substantial foreign investments have helped to cushion the impact of oil price fluctuations there is no denying the positive impact of the relative strength in oil prices. Between August 1999 and August 2000, for example, the WTI-Nymex price index ranged between US $22 and US $34 per barrel. Readers may recall that shortly before this, between February 1998 and the spring of 1999, it was a different story, with the same price index fluctuating between US $11 and US $15 per barrel, leading to an average price for UAE crude oil of US $12.4 in 1998 and US $17.6 in 1999. The net effect of these price swings is that oil prices rose from around US $11 in early 1999 to over US $34 in October 2000.
Throughout this period of price adjustment the UAE economy has hardly skipped a beat. However, whilst the firmer prices are beneficial to the UAE economy the countrys long term interest lies in stable prices that are fair to both producers and consumers.
General Economic Trends 1999
UAE gross domestic product at current prices increased from Dh 173.147 billion in 1998 to Dh 190.455 billion in 1999. This 10 per cent increase was partly influenced by a general improvement in the worldwide economy and partly by factors of particular significance to the UAE, in particular the strength in oil prices. As we have noted above, strengthening of the oil market had by far the greatest impact on the economy in 1999. The value of the oil sector increased quite dramatically from Dh 36,057 million in 1998 to Dh 48,726 million in 1999 a growth of over 35 per cent in one year.
Meanwhile the non-oil sector showed positive growth of around 3.4 per cent but declined in relative importance to total GDP, reaching 74.4 per cent of total GDP in 1999 compared to 79.2 per cent in 1998. This slight drop in relative value of the non-oil sector is of course explained by the dramatic rise in the value of the oil sector due to much stronger prices. Relatively large fluctuations in oil prices, a feature of the economy for the past 25 years, are in sharp contrast to the fairly stable growth rates in the non-oil sector where government policies of diversification and the provision of infrastructure support have helped to create a much more robust economic model than one might expect. For example, whilst value-added growth rate in the rapidly developing oil sector fluctuated quite widely during the period 19751999, the manufacturing sector value-added growth rate grew at a steadier pace from Dh 472 million in 1975 to Dh 24,009 million in 1999. The most recent 6.9 per cent increase in manufacturing (making it once again the fastest grower among the non-oil sector) represents the continuation of a trend that has brought manufacturing from a contribution of 0.9 per cent of GDP in 1975 to 12.6 per cent in 1999.