DUBAI (Reuters) - The United Arab Emirates will shift to a working week of four and half days with a Saturday-Sunday weekend from the start of next year to better align its economy with global markets.

The oil-producing Gulf state, whis is also a regional commercial, trade and tourism hub, currently has a Friday-Saturday weekend. From Jan. 1, however, the weekend will start on Friday afternoon, including for schools, a government circular said.

Over the past year the UAE has taken measures to make its economy more attractive to foreign investment and talent at a time of growing economic rivalry with neighbouring Saudi Arabia.

The working week for government entities would start on Monday and end on Friday at 12 noon before Muslim prayers, which the government said would be unified on Friday across the UAE, adding that this would improve the work-life balance for employees.

The government said the move would "ensure smooth financial, trade and economic transactions with countries that follow a Saturday-Sunday weekend, facilitating stronger international business links and opportunities for thousands of UAE-based and multinational companies".

Mohammed Ali Yasin, chief strategy officer at Al Dhabi Capital, said the financial sector would benefit from being able to make simultaneous payment settlements with developed markets and the tourism industry would also be a beneficiary.

"It could be a good experiment for other countries in the region," he said.

Friday is a weekly holiday in many predominantly Muslim countries. The government circular noted that several, such as Indonesia and Morocco, have Saturday-Sunday weekends.

Monica Malik, an economist at Abu Dhabi Commercial Bank, said she expects many private sector companies in the UAE to follow the Saturday-Sunday weekend, describing the move as a "very meaningful development" alongside other recent reforms.

The UAE has liberalised laws regarding cohabitation before marriage, alcohol and personal status laws in addition to the introduction of longer-term visas to lure businesses and talent.