The UAE Economy

The UAE Ranks High in Economic Freedom for 2026: Regional Leadership

Continuing its competitive edge in global indicators, the UAE has achieved a new milestone in the 2026 Index of Economic Freedom, ranking first regionally and 23rd globally, surpassing developed nations such as Germany, the United Kingdom, and Japan.

The Index of Economic Freedom is published by The Heritage Foundation and covers 176 economies worldwide.

The 2026 index measures economic freedom across four main pillars: the rule of law, government size, regulatory efficiency, and market openness. Each country receives a score on each of 12 sub-indicators, ranging from 0 to 100, with the overall score calculated as the average of these scores.

The 2026 edition comes at a time of ongoing global challenges related to fiscal sustainability and significant disparities in the quality of institutions and economic governance. These factors directly impact economies' ability to attract investment, boost productivity, and achieve inclusive growth. Since 1995, the index has held a prominent position among internationally ranked indices widely used for comparative analysis and monitoring reform trends.

The UAE: A Leading Model of Economic Freedom

The UAE scored 71.9 points on the 2026 Index of Economic Freedom, ranking it 23rd among the world's freest economies. This score surpasses the global average of 59.9 points and the regional average of 58.6 points.

The UAE's score on the index rose by 0.3 points compared to the previous year, placing it first among 14 countries in the Middle East and North Africa region, exceeding both the regional and global averages.

The 2026 index report classifies the UAE economy as "very free."

The pace of economic development in the UAE is based on strengthening the business environment, attracting investments, and developing the role of the private sector, while the open trade system continues to support growth momentum.

The modern financial sector is highly competitive, with no minimum capital requirement for company formation and simplified licensing procedures. Foreign direct investment is gradually shifting away from real estate and oil towards high-growth, technology-based sectors.

Employment regulations are relatively flexible, and the cost of hiring non-wage-related labor remains moderate, while monetary stability and inflation rates are kept under control.

The UAE scored highly across the four main pillars of the index:

- Rule of Law: The UAE’s property rights index exceeds the global average with a score of 62.9 points, and its government integrity index also surpasses the global average at 65.3 points, reflecting a relative improvement in corporate governance standards.

- Government Size: The UAE achieved a record high of 99.9 points in the sub-index for “Total taxes borne by individuals and businesses in an economy relative to the size of the economy.” The maximum individual income tax rate is 0%, as is the maximum corporate tax rate, while the tax burden is equivalent to approximately 0.6% of GDP.

Government spending averaged 22.3% of GDP over three years, while the average budget balance was 7.3% of GDP, placing the UAE at a high score of 85.1 points on this sub-index.

In the sub-index of fiscal health (which includes direct and indirect tax rates and the public debt burden) under the government size pillar, the UAE achieved a high score of 97.6 points, with public debt reaching approximately 34.9% of GDP.

Regulatory Efficiency: The UAE's overall regulatory framework is characterized by a high degree of relative efficiency. The country's Business Freedom Index significantly exceeds the global average (84.5 points), its Labor Market Freedom Index surpasses the global average (63.2 points), and its Monetary Freedom Index is considerably higher than the global average (81.2 points), reflecting the stability of monetary policies and the effectiveness of the regulatory environment.

Market Openness: The UAE scored 78.6 points on the Trade Freedom Index, with a trade-weighted average tariff of approximately 3.2%.

On the Investment Freedom Index, the UAE scored 50 points, reflecting a more streamlined and open investment environment. The financial sector's wide range of services contributed to the UAE's score of 60 on the Financial Freedom Index.