IMF sees positive momentum in UAE’s retail, service sectors

A persistent reform drive along with rapid acceleration of private investment underpinned by abundant liquidity has enabled the UAE and other oil exporters in the region to maintain a positive momentum in the retail and service sectors, the International Monetary Fund said on Wednesday.

The Washington-based organisation projected a non-oil GDP growth of 3.7 per cent in 2023 for oil exporters in the Middle East and North Africa. The overall regional growth is estimated to drop from 5.3 per cent last year to 3.1 per cent in 2023 due to tight policies to restore macroeconomic stability, agreed Opec+ oil production cuts, and the fallout from the recent deterioration in global financial conditions.

In its Regional Economic Outlook, the IMF said that while oil-dependent economies of the Gulf Arab states and others in the region have reaped the benefits of elevated crude prices, other countries — such as Pakistan — have seen growth collapse after unprecedented flooding last summer or as economic woes worsened.

In 2023, the Fund said that economies across the region will likely slow as persistently high inflation and rising interest rates bite into their post-pandemic gains. After surging last year, inflation is forecast to remain elevated at 14.8 per cent this year before declining modestly in 2024, the IMF said.

“This year we’re seeing inflation again being the most challenging issue for most of the countries,” Jihad Azour, the director of the Middle East and Central Asia Department at the IMF, said. “For those who have a high level of debt, the challenge of increase in interest rate globally, as well as also the tightening of monetary policy, is affecting them.”

“Amid continued uncertainty, policy tradeoffs remain complex, and striking the right policy balance will be critical. Monetary policy should focus on maintaining or regaining price stability while being mindful of financial stability risks,” said Azour.

In a media briefing, he said fiscal policy should preserve debt sustainability and build buffers while providing targeted and temporary support to protect the vulnerable. Structural reforms should be accelerated to bolster potential growth and enhance resilience, inclusion, and social safety nets.

“Since March 2020, the IMF has supported Mena countries with $25 billion in new financing, including recent Fund arrangements for Egypt, Mauritania, and Morocco—and allocated $42 billion special drawing rights to boost the region’s reserve assets. The Fund has also increased its presence on the ground by reopening our regional technical assistance office and setting up a new regional office in Riyadh, which will strengthen our partnership with the region,” said Azour.

The upcoming World Bank-IMF Bank Annual Meetings in Marrakech in October will provide a platform for wide-ranging policy discussions on challenges facing the region and the world, he noted.

The IMF warned that financial conditions worldwide will tighten this year, brought on in part by two bank failures in the United States in March. The sudden collapse of Credit Suisse before it was purchased by UBS also strained markets, it noted.

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