Non-oil growth to rebound in the UAE, IMF forecasts

The IMF said the UAE is adjusting well to the low oil price environment as non-oil economic growth rebounds in the Emirates this year. On the completion of annual discussions with UAE federal and local authorities, the fund said yesterday that its findings will be presented to the IMF executive board for consideration by the end of next month.

“The UAE is adjusting well to the new oil market realities. Its large financial buffers, diversified economy and the authorities’ robust policy responses are facilitating the adjustments while safeguarding the economy and the financial system,” said Natalia Tamirisa, the head of the IMF mission to the UAE.

The non-oil economy is set to rebound this year on stronger global trade and investment spurred by Dubai Expo 2020. Non-oil GDP is forecast to expand at 3.3 per cent this year with the budget deficit shrinking to 4.5 per cent of GDP.

However, overall growth is forecast at 1.3 per cent on a contraction in the oil economy as the UAE cuts crude output in line with a global supply deal among producers.

Meanwhile, after the governments of the seven emirates tightened fiscal policy by about 9 per cent of GDP on a consolidated basis in 2015 and a further 5 per cent in 2016, they now have room to ease that process.

Infrastructure spending is set to grow more slowly in the coming years and the introduction of value added tax next year will boost state revenues. The result will be that the UAE effectively eliminates its fiscal deficit around 2022, Ms Tamirisa said.

* With Reuters

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