Surplus budget to propel UAE growth, social sector development

The UAE surplus budget will propel economic growth and give more room to the government to spend more on social sector development, experts say.

Analysts, economists and industry experts said Dh3.4 billion surplus for the next three years is a positive news for economy, which is expected to grow by 5.4 per cent and 4.2 per cent in 2022 and 2023. They said health and education will be the biggest beneficiary as they form the most significant component of the finance document.

Atik Munshi, managing partner, FinExpertiza UAE, said the current announcement of the UAE budget for three years is a positive note for the UAE economy and the nation as a whole.

“A surplus budget denotes the strength of both the government and the health of its economy. The fantastic handling of the Covid-19 threat and rebound of oil prices have helped the UAE government to reach this positive level plus the reforms in laws and visas, which have boosted investor confidence and FDIs,” Munshi told Khaleej Times on Monday.

He said the UAE government has further laid the stress on upliftment of the nation’s social fabric which is reflected in the budget allocation of more than 47 per cent to the social development and social benefits programmes.

Surplus budget approved

On Monday, the UAE Cabinet approved the federal budget for the fiscal years 2023-26 with a total expenditure of Dh252.3 billion and Dh255.7 billion revenues, reflecting a surplus of Dh3.4 billion.

His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, approved the UAE budget for 2022 with total expenditure of Dh58.93 billion in October last year. However, the Federal National Council announced in June that the government planned to boost its spending by an additional Dh1.23 billion by utilising funds from the general reserves.

Higher spending to boost economy

Analysts said the UAE economy staged a strong rebound from the pandemic-driven slowdown last year and the economic momentum has picked up pace this year. The economy, which expanded by 3.8 per cent in 2021, is set to grow at the fastest annual pace since 2011 after growing by 8.4 per cent in the first quarter of this year on higher oil prices and successful Covid-19 mitigation measures.

Vijay Valecha, chief investment officer at Century Financial, said the net expenditure of the Union budget of UAE for the next three years is forecast at Dh252.3 billion or an average of Dh84.1 billion per year.

“This is commendable as the average expenditure per annum represents a growth of 44.25 per cent from the 2021 budget. The higher spending on the fiscal side will give a fillip to the UAE economy and boost the overall employment numbers,” Valecha told Khaleej Times on Monday.

He said the social sector, including health and education, is the biggest beneficiary as they form the most significant component of the finance document.

Furthermore, he said the budget is balanced, which suggests that the revenue receipts will be substantial due to a vibrant economy.

“Additionally, the overall objective of the budget from a policy perspective is to lay the foundation for the next 50 years,” Valecha said.

More spending on social sector

Saad Maniar, senior partner at Crowe, welcomed the surplus budget and said it would lay down a solid foundation for the prosperity of the nation as the government will spend more on social sector development.

“This is commendable leadership by the Rulers of the UAE. When the world is struglling to address the budget deficit, it is great to see the news that UAE has announced surplus in their budget for the next three years. What it means is that the UAE government will have that much more funds to invest in the new programme to enhance the experience of its residents and may also be able to further improve the social security,” Maniar told Khaleej Times on Monday.

“It may also contribute to a fall in aggregate demand and price level in the economy and this may help combat inflation. With the ambitious plan that the UAE has in terms of digitalisation and innovation, with such budget surplus, I foresee that it will fuel further growth in the economy,” he said.

—muzaffarrizvi@khaleejtimes.com