INSIGHTS
Impact of VAT Implementation on UAE Economy
It is a year since Saudi Arabia and the UAE became the first Gulf states to implement VAT. It will take a couple of years before the impact, including secondary and indirect effects, can be fully assessed. However, the initial data suggests that the new tax policy has been relatively successful in diversifying government revenue without producing excessive inflation. Nevertheless, there have been ‘teething’ problems which need to be ironed out. These lessons may help in facilitating its implementation in the remaining Gulf states.
UAE Business Growth in 2020
According to a report in Khaleej Times, International Monetary Fund forecasts that the gross official reserves of the UAE would grow from USD 76.8 billion in 2015 to USD 118.4 billion in 2020. The current account surplus would grow from USD 17.6 billion in 2015 to USD 33.4 billion by 2020. December data signalled a downbeat end to the year for the UAE non-oil private sector, with output growth the weakest in over eight years and new work rising only marginally after November’s downturn. Selling charges continued to drop, putting further pressure on margins. Expectations remained elevated though, as firms held on to hopes that increased investment and tourism will support business activity growth during 2020.
Emerging Industries
According to a recent report by Bloomberg Intelligence, fintech startups in the region is forecast to expand from 96 in 2019 to 465 by 2020 and the investment into Middle East fintech via venture capital is expected to grow to USD 2 billion in 2022. Here we explore the growth of fintech in the region and opportunities for potential investment and business setup in the UAE. Over the recent years, the UAE has emerged as a leader in the regional financial sector across the Middle East and Africa. Today, the UAE is home to approximately one third of the fintech startups in the region, with businesses set up in Dubai or Abu Dhabi. Even though the UAE has showed a fast growing number of fintech startups, the level of investment in the region is still modest. Between 2010 and 2017, over USD 90 billion was invested in fintech startups globally, however, only 1% of this was allocated to companies in the Middle East and Africa, according to a report by Accenture and Fintech Hive.