Dubai: The UAE is making serious attempts to reform its economy and public finances to adjust to the new reality of lower oil prices, and the country has a head start in reforms in terms of economic diversification and larger role for private sector in the economy, said Senior Citi executives.

“There have been efforts at consolidation, be it in the financial sector, in the public sector or the oil sector. This is all in the agenda of driving efficiency and dealing with the new lower levels of commodity prices,” said Elissar Farah Antonios, Citi CEO, UAE.

The UAE is the most diversified economy within the GCC, and thus has been the least vulnerable to the low oil price environment of the past two years. Among the emirates, Abu Dhabi has been in the forefront of fiscal and other economic reforms last year as it bears the greater impact of lower oil prices.

As part of its adjustment efforts, the government has cut back on spending plans, mainly in the project space. In parallel, authorities have embarked on a process of rationalisation in the public sector, first with the announced plan to merge two of the largest domestic state-controlled banks, First Gulf Bank and National Bank of Abu Dhabi, and later with that of two large government-owned investment funds, Mubadala and IPIC.

The emirate has accumulated significant fiscal reserves in recent years and benefits from these both as a fiscal cushion and a source of non-oil income. Abu Dhabi’s relatively cautious approach to spending during the oil boom years has meant that the near-term fiscal imbalances are not nearly as acute as in some other GCC countries, and the corresponding adjustment process will not be nearly as difficult, according to Citi officials.

Although Dubai’s public finances remain largely unaffected by lower oil prices, the emirate faces headwinds to economic growth. Although Dubai may well be the ultimate regional success story in terms of diversification, this does not insulate it from the effects of lower oil prices.

“We can’t rule out the impact of business cycles on the local economy. If we look back, Dubai learnt a great deal from the financial crisis in terms of restructuring debts and the economy has been working hard at diversifying the economies. Today, despite low oil prices, the proposition of Dubai as a hub and the business it attracts is quite exceptional and no one can compare with that proposition in the region,” said Antonios.

The unique economic strength of Dubai makes it Citi’s regional hub for the Middle East and Africa region. The bank currently serves more than 500 global companies in the region from the Dubai hub.

Citi officials say to cover Africa, there is no other regional hub that is as suitable as Dubai because of the direct transportation and logistics links to Africa.

“Our global clients’ presence in Dubai has grown phenomenally and that has been core growth for us in terms of who we are servicing and what we are doing out of Dubai. That is a testimony to the emerging status of Dubai as a regional hub,” said William J Mills, Vice-Chairman and Chief Executive Officer, North America, Citi.