By Andy Sambidge
ICAEW report hails country's progress but says more needs to be done to reduce oil dependance
The UAE has made great progress on economic diversification, but cannot afford to slacken the pace, according to the Institute of Chartered Accountants in England and Wales (ICAEW).
In its latest quarterly report, the accountancy and finance body highlighted the efforts made to reduce reliance on oil exports, but said that more needs to be done in order to avert long term problems.
The report showed that the UAE and Qatar have experienced a "remarkable period of growth" and established leading financial centres, making great strides in diversifying both the wider economy and energy production.
However, it cautioned that huge population increases and energy-intensive industry mean energy consumption is growing faster than production, a problem which is being distorted by energy subsidies.
The study urged that reducing energy subsidies, diversifying energy sources and investing in competitiveness are vital in order for long term growth in the region.
Charles Davis, ICAEW's economic adviser, said: "Booming populations mean energy demand is increasing, whilst energy subsidies are distorting that demand even further.
"Fuel and electricity are very cheap across the Middle East, partly thanks to subsidies. But money spend on subsidies can't be spent on improving competitiveness.
"Abu Dhabi, Dubai and Qatar stand out from the region as a whole for their efforts in diversification, but more will need to be done to safeguard prosperity in the long term."
Peter Beynon, regional director, ICAEW Middle East, added: "The UAE has seen great leaps forward in diversification, with financial services, first class infrastructure, and tourism all delivering economic growth that is not directly reliant on oil.
"However, more investment is needed in 'human capital' ensuring the growing population has the skills needed to grow the economy and to attract people to do business here.
"The private sector must be allowed to flourish in order to make sure that growth is sustainable in the longer term."