Investment and long-term strategies increase economic growth in Sharjah

Among the most diversified economies within both the UAE and the wider GCC region, Sharjah has developed strong manufacturing, tourism and logistics industries, among other non-oil sectors. Against a backdrop of reduced oil prices and lower economic growth, the local and federal authorities are working to further develop the economy through a range of measures intended to improve the business environment, attract more foreign investment and bolster government finances.


The value of Sharjah’s GDP stood at Dh85.66bn ($23.6bn) in 2015, according to the latest data from the UAE’s Federal Competitiveness and Statistics Authority (FSCA). The value of GDP for the UAE as a whole was Dh1.37trn ($373bn), meaning that Sharjah accounted for 6.3% of national economic output, making it the third-largest economy in the federation, after Dubai and Abu Dhabi. According to credit ratings agency Moody’s, the largest sector of the Sharjah economy in 2015 was real estate and business services, accounting for 22% of GDP, followed by manufacturing on 16.5% and trade and retail at 12.4%. The financial corporations sector accounted for around 10.3% of the emirate’s GDP, followed by construction (8.6%), extractive industries (7.7%), transport, storage and communications (6%), and government services (4.2%).

Real GDP growth in Sharjah stood at 0.6% in 2015, down from 1.6% the year before and 7.1% in 2013, according to latest available figures from Moody’s. Such growth was below the level of the UAE as a whole, estimated at 3.97% by the IMF. While many sectors of the emirate’s economy performed strongly – for example, the financial services sector grew by 13% in nominal terms, wholesale and retail trade by 9%, and real estate, business services, and tourism, restaurants and hotels by 8% each – growth was pulled down by a 31% decline in the value of the extractive industries sector. This is largely a result of the fall in international oil prices that took place during 2015, with the price of a barrel of Brent crude falling from $56.40 at the start of that year to $37.30 at its end, a drop of 33.9%. The sector’s contribution to Sharjah’s GDP fell to 7.7% as a result, compared to 11.6% the previous year. Reduced public expenditure by the UAE’s government, partly a consequence of the oil price fall, has also had an impact in recent years. “Government spending is down, especially federal spending,” Mathias Angonin, sovereign risk group lead analyst at Moody’s Investors Service Middle East, told OBG, observing that the federal authorities had reduced infrastructure spending in particular.

Going Forward

Khalifa Mohammed Al Kindi, chairman of the Central Bank of the UAE, told OBG that on a broader note the central bank projects that growth will rebound starting in 2017, projected to be 2.8% in the non-energy sector. The outlook bodes well for healthy and efficient intermediation by banks in support of credit growth, as well as continued growth of the non-energy sector in terms of its share of the economy and attaining goals of further diversification.

Al Kindi added that over the last two years, gross foreign and domestic credit has grown by 16.1% (equivalent to 7.7% annual average), with cumulative growth of 13.7% for domestic credit over two years. The share of foreign credit in gross credit remains limited, averaging 7.3% over the same period. Out of the total domestic credit, exposure to the public sector has remained steady, with a share of the total averaging 24.9% over last two years, compared to 73.9% for the private sector.

Economic Leader

The financial services industry has constituted the fastest-growing sector in Sharjah since 2010, expanding by 68.6% in nominal terms between 2010 and 2015 – though this may in part reflect the contraction of the segment in the years before 2010, due to the international financial crisis. Several of the largest players are locally headquartered banks, two of which – Bank of Sharjah and Sharjah Islamic Bank – are part-owned by the emirate’s government through its investment arm Sharjah Asset Management (SAM), and two insurance firms (see Financial Services chapter). The next fastest-growing sectors between 2010 and 2015 were social and personal services (46.3%), real estate and business services (44.7%), and construction (37%).

In a November 2016 report, Moody’s forecast that real GDP growth in the emirate would fall to 0.3% for 2016 as a whole. In the October 2016 update to its World Economic Outlook database, the IMF forecast real GDP growth for the UAE as a whole to stand at 2.3% in 2016, rising to 2.5% in 2017. Tom Koczwara, director of the Debt Management Office at Sharjah’s Department of Finance, told OBG that the authorities did not have a forecast for GDP growth, but that he thought it would be positive but constrained. He told OBG, “Hydrocarbons and real estate are both fairly weak at the moment, while retail and manufacturing are performing strongly.”


GDP per capita figures were revised after a 2015 census found that the population was larger than expected. The number of residents had been thought to stand at around 900,000 in 2014, but the 2015 census revealed the figure to be around 1.4m. As a result, GDP per capita stood at around $16,558, having been estimated at $26,335 in 2014, according to figures from Moody’s. Officials in Sharjah, however, were aware that the census numbers underreported the many workers with Dubai visas who lived in Sharjah, and were therefore not reported. The emirate’s consumer price index for the 2011-20 period is expected to be around 2.6%, compared to 2.5% for the UAE as a whole, over the same period, according to figures from Moody’s. In August 2016 inflation had increased by 0.2% year-on-year. In its annual credit analysis for the emirate, which was published in November 2016, the agency forecast the figure to reach 3.2% for the year.

Exchange Rate

The UAE dirham is pegged to the dollar at a rate of $1:Dh3.67. GCC currency pegs more generally – in particular those of Oman, Saudi Arabia and Bahrain – have come under pressure in recent times as a result of the fall in oil prices since 2014 and the rise in the value of the dollar in 2016. However, in June 2016 Mubarak Rashed Al Mansoori, the governor of the UAE’s central bank, stated that he did not see strong pressure on the dirham itself and that the UAE was committed to the peg.

“Exporters to extra-regional customers are likely to be suffering as a result of the rise in the dollar, but the peg is something of a necessity given the country’s large expatriate population,” Benjamin Young, associate director for sovereign and international public finance ratings at Standard & Poor’s Global Ratings, told OBG, adding that Sharjah’s lack of its own monetary policy was something of a weakness for the economy given its heavy reliance on manufacturing. Angonin said the high US dollar could impact growth, but that the UAE was unlikely to see an exodus of firms even if it maintained the peg and the greenback remained high. “Most companies here have to be based in the GCC for one reason or another,” he told OBG.


The UAE held foreign reserves of Dh285.16bn ($77.8bn) at the end of November 2016, according to data as of January 2017 from the federal central bank. Despite the fall in the oil price, the figure was more or less unchanged from Dh284.82 ($77.5bn) in November 2015. Over the longer term, reserves have grown strongly from Dh116bn ($31.6bn) at the end of 2008 and Dh283.91bn ($77.4bn) at the end of 2014.


The value of imports into Sharjah stood at Dh31.29bn ($8.5bn) in 2015, according to latest available data as of January 2017 from the FSCA. This was up from Dh29.76bn ($8.1bn) the previous year, but down from a recent historical peak of Dh36.88bn ($10.1bn) in 2012. It is worth noting that trade data from the Sharjah Department of Statistics and Community Development (DSCD), which as of January 2017 only had data up to 2013, puts the value of imports significantly higher at Dh52.58bn ($14.3bn), and the value of exports and re-exports significantly lower for the years for which data from the two providers overlap. Major categories of imports into the emirate in 2013, according to latest available data broken down by category from the DSCD, included pearls, stones and precious metals, which reached a value of Dh12.6bn ($3.4bn) – though much of this was subsequently re-exported. This was followed by vehicles at Dh8.13bn ($2.2bn), again most of which were re-exported, mineral products for Dh6.98bn ($1.9bn), machinery and parts at Dh5.7bn ($1.5bn), most of which were also re-exported, and chemicals and related products for Dh3.87bn ($1.1bn). It is also important to note that a large portion of Sharjah’s exports and imports enter and exit through the emirate’s open borders and is not reflected in the emirate’s trade data.

According to the FCSA, the value of non-oil exports, not including re-exports, stood at Dh5.79bn ($1.6bn) for 2015, down on the 2014 figure of Dh8.37bn ($2.3bn). Based on the DSCD’s figures, non-oil exports in 2013 broke down into machinery and parts, valued at Dh1.4bn ($381.7m), followed by base metals and articles of base metal for Dh934.57m ($254.8m), and mineral products at Dh615.7m ($167.8m).

The emirate is also a major re-exporter, with the value of re-exports totalling Dh26.64bn ($7.3bn) in 2015, down from Dh35.44bn ($9.7bn) the previous year, according FCSA data. By far the largest categories of re-exported goods, according to the DSCD 2013 data, were pearls, stones and precious metals for a value of Dh16.4bn ($4.5bn), followed by vehicles at Dh7.58bn ($2.1bn), and machinery and parts at Dh7.5bn ($2bn). Koczwara told OBG a key advantage of the emirate as regards foreign trade was that its commercial ties are not excessively concentrated on any particular geographical area. “Sharjah is part of a large trading zone with a population of around 2bn people, and if one part of the area is doing badly, the emirate can shift its focus to another,” he told OBG, adding that this was visible in the emirate’s trade statistics, with frequent shifts in the relative importance of trading partners.

Diversified Economy

Young described the emirate as one of the most diversified economies in the region, with hydrocarbons playing a comparatively minor role compared to many other emirates and GCC states. The extractive industries accounted for 7.7% of GDP in 2015 and 13% the previous year, compared to 24% and 36%, respectively, for the UAE as a whole, according to figures from Moody’s. Key non-oil industries that have reached high levels of development in the emirate include tourism, which is bolstered by factors such as: Sharjah’s reputation as a family destination for GCC nationals and a ban on the consumption of alcohol; the combination of its proximity to tourism hotspot Dubai and significantly lower accommodation prices; and the development of Air Arabia, the region’s first and largest low-cost airline, which is headquartered in the emirate and operates its main hub out of Sharjah International Airport. The emirate’s status as one of the pre-eminent cultural hubs of the region is bolstered by the presence of a large number of museums and events, such as the Sharjah Art Foundation’s biennial art exhibition and the Sharjah International Book Fair.

Another key sector that has bolstered economic development over recent years is manufacturing. The industry benefits from the existence of 18 industrial zones and two major free zones. The Hamriyah Free Zone, adjacent to Hamriyah Port, north of Sharjah city, and the Sharjah Airport International Free Zone, near the airport, both offer incentives like 100% foreign ownership and 100% profit repatriation. Onshore-licensed firms based outside of free zones are generally required to be majority-owned by a GCC national, with some exceptions. “There is strong competition between free zones in the northern emirates, but Sharjah is in a strong position as it has two complementary free zones at a seaport and the airport,” Angonin told OBG.

Onshore companies, which include those based outside of the free zones, also benefit from a minimum capital requirement of Dh150,000 ($40,900), the lowest in the UAE. The manufacturing sector in turn benefits from the emirate’s well-developed transport and logistics industry, and, in particular, its status as the only region in the UAE to host a deepwater container port outside the Straits of Hormuz in the form of the Khorfakkan Container Terminal.

Public Spending & Revenues

As with the oil industry, the government plays a comparatively small role in the economy by regional standards. Spending by the government of Sharjah amounted to 9.1% of GDP in 2015, down from 9.6% the previous year, according to figures from Moody’s. In its November 2016 update on the emirate, the agency forecast that the figure would fall again for the year as a whole to 8.9%. Revenues, meanwhile, were worth 4.9% of GDP in 2015, down from 6.9% a year earlier, leading to a rise in the size of the public deficit (see analysis). However, Moody’s forecast the figure to rise in 2016 to 6.9% of GDP.

With little in the way of a tax system currently in place, though this is set to change in 2018, the emirate relies primarily on non-tax income streams such as fees, fines and asset sales to provide government revenue. According to Sharjah’s Department of Finance, around half of revenue comes from government activities such as service fees, charges and fines, a quarter are from land sales and hydrocarbons, with the rest derived from commercial activities. Angonin told OBG the authorities were efficient at collecting fees, though he described revenues as somewhat volatile due to the importance of intermittent revenue streams such as land sales.

Figures for the value of federal spending in the emirate are not available, although Angonin estimated them to be similar in size to overall spending by the Sharjah government. Such spending largely takes the form of the construction of federal infrastructure passing through Sharjah, such as major pan-UAE roads, funding for housing and social security benefits for Emiratis living in Sharjah, as well as local activities conducted by the federal police and defence-related activities. Moody’s 2015 report noted that the federal government and Abu Dhabi emirate, which is the key contributor to federal funds, are seeking to reduce both federal spending and Abu Dhabi’s contribution to the total following the recent fall in oil prices (see analysis).

Tax Change

In February 2016 the federal authorities announced that they would introduce a value-added tax (VAT) on goods purchased in the country, with some exemptions, from 2018 onwards. The planned tax is expected to be implemented at a rate of 5%. Angonin told OBG that he understood that an agreement had been reached under which taxes will be collected by the country’s emirates, which will keep half of the revenues while passing the other half on to the federal government, meaning the move should significantly bolster Sharjah’s public finances.

The federal government expects VAT to bring in around Dh12bn ($3.3bn) across the country in the first year of implementation, rising to between Dh18bn ($4.9bn) and Dh20bn ($5.5bn) in 2019. Young said he thought the move could pave the way for the introduction of other taxes. “The authorities are unlikely to bring in direct income tax in the short term, but the eventual introduction of corporate tax is a possibility,” he told OBG, adding that he did not think firms operating in the country would be seriously concerned by the introduction of a corporate tax rate of around 5%.

In addition to its regulatory activities and ownership of public firms such as the Sharjah Electricity and Water Authority and Sharjah National Oil Corporation, the government plays a further role in the economy through stakes in several strategic private companies via SAM. Major local firms in which the fund has substantial stakes include Air Arabia, in which it is the largest stakeholder with a share of 17.4%, and the locally headquartered Bank of Sharjah (17.2%) and Sharjah Islamic Bank (31.3%). SAM also has a 4% stake in Dana Gas, which operates the Sharjah Western Offshore concession, and a 16% stake in the Sharjah Cement Factory.

The Sharjah Investment and Development Authority (Shurooq) is another important government-backed economic player. In addition to its role as an investment agency, Shurooq also acts as a project developer, focusing primarily on the tourism segment. Projects recently completed or currently under development include: the Al Bait Hotel, a traditionally styled, five-star boutique hotel that is one of the centre pieces of the Heart of Sharjah heritage tourism project that was finished in late 2016; and the Al Jabal Resort, also known as the Cheddi Khorfakkan Resort project (see Tourism chapter). Nevertheless, the government plays a restricted ownership role compared to those of some other emirates, generally preferring minority shareholdings outside a handful of strategic firms and utilities in order to allow the private sector to take the lead. “Here the government sees its role as facilitating private sector activity and does not aim to own large sections of the economy,” Koczwara told OBG.

In addition, the UAE’s Federal Transport Authority (FTA), established in 2006, is responsible for proposing and developing general policies, laws and regulations for both marine services and land transport services at the national level. The FTA coordinates closely with the relevant authorities at the emirate-level to supervise policy implementation and ensures that local authorities receive the necessary support required to carry out plans. The FTA has been responsible for overseeing various major projects in recent years, including the Al Badea intersection project, which is set to be completed by the end of 2017, at an estimated cost of Dh200 ($54.5m). Planned in three phase, the first phase will include a bridge for traffic flow from Dubai heading directly to the University of Sharjah campus, while the second phase will include an exit comprising three lanes for motorists headed to Dubai. The final phase will include the expansion of the existing bridge over the intersection at Emirates Road and Meleha Road.


Despite the diversified nature of Sharjah’s economy, prospects for growth will partly depend on the fortunes of international oil prices in the coming years, given, for example, the importance of other GCC and Middle Eastern countries as export destinations for the emirate, as well as the role federal government spending plays in the local economy. Nevertheless, plans to attract greater levels of foreign investment (see analysis) should help to further reduce the importance of oil to the emirate, as should government plans to continue to borrow in order to fund more capital investment.



You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Sharjah 2017

Economy chapter from The Report: Sharjah 2017

Cover of The Report: Sharjah 2017

The Report

This article is from the Economy chapter of The Report: Sharjah 2017. Explore other chapters from this report.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart