The Emirate of Sharjah, the UAE’s 3rd largest Emirate both in terms of economy and population, has shown an average GDP growth of 6% a year from 2010 to 2015. The economy of Sharjah has a relatively diverse production base and is not directly dependent on oil and gas. However, Sharjah’s main regional economic partners are oil-dependent economies. Consequently, changes in regional economics due to the downturn in the oil market have slowed Sharjah’s growth since 2015.
Sharjah’s GDP stands at $24.81 billion in 2015. Standard & Poor’s estimates that GDP per capita will be at about $31,000 in 2016. Sharjah’s GDP growth is expected to remain at around 4% in 2017, according to Moody’s Investors Service.
Sharjah’s GDP growth
Source: UAE Ministry of Economy
Sharjah’s fiscal deficits are forecast to reach 14% of GDP by the end of 2016. Moody’s affirmed its A3 long-term credit rating for the emirate of Sharjah with a stable outlook in December 2016. The Emirate’s economy has slowed down however, and Sharjah's debt burden and debt affordability are still low, according to Moody’s. Inflation in Sharjah has fallen steeply since the beginning of 2016, increasing by only 0.2 percent year-on-year in August 2016.
The key sectors contributing to GDP are real estate and business services. These are followed by manufacturing, mining and energy, and wholesale and retail.
GDP Contribution by Sector in Sharjah
Sharjah’s budget was $5.5 billion in 2016. The biggest line item in Sharjah’s budget is economic development projects which will reinforce sustainable growth in the Emirate.
Sharjah’s Budget Allocation in 2016
Sharjah government increased its government spending allocations in its annual budget for 2016 by 2% on the previous year. Sharjah government also raised capital expenditures by 6% in 2015, raising the total percentage to 25%.
The government of Sharjah’s revenue sits at about 6% of GDP. The government's budget outlines the major contributors to government revenues as customs (17%) and company registration fees (15%). It is predicted that the planned VAT, which will be introduced in 2018, will also help to increase the stability of Sharjah’s government’s revenue. However, VAT could make the Emirate of Sharjah less attractive to foreign companies.
In order to diversify its revenue sources the government backs various initiatives to encourage startups establishing themselves in Sharjah. Sharjah hosts more than 16% of all SMEs in the UAE, which exceed 45,000 in number. Currently, Sharjah has three free zones: Hamriyah Free Zone, Sharjah Airport International Free Zone, and Sharjah Media City. The free zones in Sharjah, which allow for full foreign ownership of companies with no tax or restrictions on invested capital, host around 13,500 companies from 157 countries across multiple industrial sectors.
The manufacturing and tourism sectors play a crucial role in Sharjah’s economic development plans. Sharjah accounts for nearly one-third of the UAE's entire manufacturing sector, which alone accounts for almost 16% of GDP. The Industrial Affairs Department estimates that the contribution from the industrial sector to Sharjah’s GDP may reach 25% by 2025.
Under its Tourism Vision 2021, the Emirate aims to attract 10 million tourists per year by 2021. Sharjah has recorded a 7% increase in hotel revenue, reaching Dh378 million in the first six months of 2016. The number of Asian tourists grew by 12%, making Asia the second largest source market for Sharjah, after the GCC which sent nearly 220,000 visitors during the first six months of 2016.
Despite the tighter banking sector liquidity and slowdown in investments, it is expected that large public sector infrastructure projects in Dubai and Abu Dhabi will provide support for Sharjah's economy in the medium term. BMI Research expects construction for the Dubai Expo 2020 will stimulate growth of more than 6% in the construction sector alone.