The IMF latest predictions have indicated that the real GDP of the UAE will increase by 4.8 percent in 2025 and by 5.0 percent in 2026, which is a positive change to the forecasted growth in 2025.
This puts the UAE at the forefront of most of the emerging markets, and way above the estimated global growth of approximately 3.2 percent by 2025.
Among the factors that have contributed to the currently high performance of the IMF are sound non-hydrocarbon sector performance (tourism, construction, financial services), robust domestic demand, and the continued investment in infrastructure.
Playbook of UAE and What Can be Learnt by Pakistan
1. Alternative to oil/hydrocarbons
Oil is not the only source of strength of development in the UAE. IMF points out in particular that the growth is being driven by non-hydrocarbon industries.
Although the economy of Pakistan is already more diversified than some oil-states, a greater proportion of non-commodity high growth sectors (information technology, high-value manufacturing, tourism) would minimize the effects of commodity fluctuations and improve resilience.
2. Infrastructure, investment and tourism
The outlook of the growth of the UAE is upheld through the heavy investment in the infrastructure, real-estate, tourism hubs, and services.
Pakistan boasts of a huge and expanding domestic market, strategic location, and tourism, logistics (CPEC-related), and services potential. It could be important to follow the example of the UAE and develop with the emphasis on modern infrastructure and tourism ecosystems to stimulate the increase.
3. Resilience and sound macro-policy.
The IMF also reminds that the UAE has created large buffers, structural reform momentum and are less vulnerable to global shocks because of policy discipline.
The main ones include strengthening fiscal discipline and independence of the central bank, rebuilding the reserves and improving the climate of investments. In the case of Pakistan, it implicates maintaining reforms in taxation, governance and credibility of the institutions.
4. Exceeding the growth in the region
IMF estimates that UAE will expand more than the average of the Middle East and Central Asia region (3.5 percent per 2025).
Although Pakistan does not fall under the same umbrella of the Gulf region, the general message is obvious, with the correct policies and the changes in structure, one country can be seen to be far ahead of its peers. By addressing structural bottlenecks (education, energy, governance), Pakistan can strive to increase the growth potential of this country above the average in South Asia.
5. Export and services are also oriented
In the IMF note on the UAE, there is a greater level of exports of goods and services (non-oil in particular) and slower increase in imports as an indicator of external balance.
Pakistan must encourage exports of value added products (textiles, electronics), services (IT, business process outsourcing). This will be assisted by better logistics, trade deals, and quality standards.
Challenges & Warning Signals
Even high-performing economies are at risk of global headwinds: trade tensions, commodity price swings, regional instability, IMF warns.
In the case of the UAE, something that can be considered as a source of price-pressures is housing and real-estate.
With a surge in growth, inflation, asset bubble, and external weaknesses may also become a problem unless handled with care.
What Can be Done by the Pakistan’s Policymakers
Target the areas that have high potential: Find and nurture similar sectors as the growing tourism/construction/finance in the UAE i.e. in the case of Pakistan identify IT, renewable energy, tourism, agribusiness sectors.
Increase investment (local and foreign): Streamline the regulatory regime, reassure investors, encourage government-business relations.
Increase human capital and infrastructure: As the UAE did by major infrastructure expansion, Pakistan needs to invest in transport, digital infrastructure, energy, education.
Keep the macro-economic situation stable: Reserve buffers, sound fiscal policy, independent central bank.
Expand exports and trade relations: Pakistan must forge trade/CEPA-type agreements, diversify exports markets, enhance value-added levels of production.
Encourage diversification: Same as UAE is becoming less dependent on oil, Pakistan too needs to decrease its dependency on primary commodities and low-value exports.
The fact that IMF projections of UAE (4.8 percent future growth) are very strong is not merely a figure but a manifestation of the success that is brought about through good policy, diversification, and investment. In the case of Pakistan, the contexts may vary but the lessons can be traced back: with focused reform, investment in engines of growth, and macro-discipline, better and more sustainable growth can be created.
When Pakistan is able to follow some of the most critical aspects of the UAE strategy such as diversifying non-commodities, investing in infrastructure and human resource and stabilizing the policy regimes, it can enjoy enhanced growth in a sustainable manner in the next few years.
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