2021 Index of Economic Freedom

United Arab Emirates

OVERALL SCORE76.9
WORLD RANK14
Rule of Law

Property Rights80.8

Judicial Effectiveness81.1

Government Integrity66.0

Government Size

Tax Burden100.0

Government Spending73.0

Fiscal Health98.5

Regulatory Efficiency

Business Freedom80.0

Labor Freedom81.6

Monetary Freedom80.6

Open Markets

Trade Freedom81.4

Investment Freedom40.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 9.8 million
  • GDP (PPP):
    • $744.1 billion
    • 1.3% growth
    • 2.3% 5-year compound annual growth
    • $69,901 per capita
  • Unemployment:
    • 2.4%
  • Inflation (CPI):
    • -1.9%
  • FDI Inflow:
    • $13.8 billion

The United Arab Emirates’ economic freedom score is 76.9, making its economy the 14th freest in the 2021 Index. Its overall score has increased by 0.7 point, primarily because of an improvement in fiscal health. The United Arab Emirates is ranked 1st among 14 countries in the Middle East and North Africa region, and its overall score is above the regional and world averages.

The economy of the United Arab Emirates has maintained its standing among the ranks of the mostly free this year. Additional economic freedom is essential, however, if the government is to succeed in diversifying away from reliance on the hydrocarbons sector. Substantial reductions in subsidy payments would likely raise Index indicator scores for government spending and monetary freedom. More regulatory openness to foreign investment would also be a plus.

IMPACT OF COVID-19: As of December 1, 2020, 576 deaths had been attributed to the pandemic in the United Arab Emirates, and the economy was forecast to contract by 6.6 percent for the year.

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Background

The United Arab Emirates is a federation of seven monarchies: Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al-Khaimah, Sharjah, and Umm al-Qaiwain. The Federal Supreme Council selects the president and vice president for five-year terms, and there are no term limits. Abu Dhabi’s Sheikh Khalifa bin Zayed al-Nahyan has been president since 2004. In July 2020, the UAE merged half of all federal agencies with other authorities and ministries. The UAE has an open economy with a high per capita income and a sizable annual trade surplus. Oil and gas account for about 30 percent of GDP. A peace agreement signed with Israel in September 2020 should clear the way for increased trade, investment, technological cooperation, tourism, and strategic cooperation against Iran, which both the UAE and Israel regard as the chief threat to regional stability.

Rule of LawView Methodology

Property Rights 80.8 Create a Graph using this measurement

Judicial Effectiveness 81.1 Create a Graph using this measurement

Government Integrity 66.0 Create a Graph using this measurement

Mechanisms for enforcing property rights are predictable and fair, although each emirate establishes its own procedures for land ownership. The judiciary is not independent, and court rulings are subject to review by the political leadership, but the rule of law is generally well maintained. The UAE is one of the least corrupt countries in the region, but nepotism and corruption persist, and the government generally lacks transparency.

Government SizeView Methodology

The UAE has no income tax and no federal-level corporate tax. Different corporate tax rates exist in some emirates, and a value-added tax has been in force since 2018. The overall tax burden equals 0.1 percent of total domestic income. Government spending has amounted to 30.0 percent of total output (GDP) over the past three years, and budget deficits have averaged 0.3 percent of GDP. Public debt is equivalent to 26.6 percent of GDP.

Regulatory EfficiencyView Methodology

The United Arab Emirates has cut the fees for business incorporation. Lowering the number of inspections and using a risk-based approach have made it easier to deal with construction permits. Labor unions and worker strikes are prohibited. According to the IMF, the government was projected to spend 1.4 percent of GDP on subsidies in 2020.

Open MarketsView Methodology

The United Arab Emirates has four preferential trade agreements in force. The trade-weighted average tariff rate is 4.3 percent, and 73 nontariff measures are in effect. Efforts to attract greater foreign investment continue. The cabinet has designated 122 economic activities across 13 sectors as eligible for up to 100 percent foreign ownership. The financial sector is modern and competitive, and the presence of foreign institutions in banking is strong.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1United Arab Emirates76.90.7
2Israel73.8-0.2
3Qatar72-0.3
4Bahrain69.93.6
5Saudi Arabia663.6
6Jordan64.6-1.4
7Oman64.61.0
8Kuwait64.10.9
9Morocco63.30.0
10Tunisia56.60.8
11Egypt55.71.7
12Lebanon51.4-0.3
13Algeria49.72.8
14Iran47.2-2.0


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