UAE set for strong near-term growth after a robust 2022: IMF

The UAE’s economic growth has been robust in 2022, led by a strong rebound in tourism, construction, and activity related to the Dubai World Expo, as well as higher oil production in line with the Opec+ production agreements, the International Monetary Fund has said.

Overall, GDP growth is projected to reach above six per cent in 2022, higher than the previous forecast, and recording a remarkable increase from a 3.8 per cent surge in 2021, the IMF said after its team, led by Ali Al Eyd, held discussions with the UAE authorities for the 2022 Article IV Consultation from November 2 to 17, 2022.

Going forward, the near-term economic growth is forecast to be strong, underpinned by a rebound in domestic activity, while elevated oil prices support high surpluses in the fiscal and external balances. Inflationary pressures are expected to moderate gradually, the Washington-based lender said.

The non-hydrocarbon sector is expected to grow around 4.0 per cent next year and accelerate over the medium term, underpinned by the government’s ongoing reforms.

Al Eyd observed that the UAE’s fiscal and external surpluses have increased further, benefiting from the higher oil prices as well as the removal of the temporary Covid-crisis related fiscal support to businesses and households as the pandemic has gradually waned. Increased global uncertainty led to larger financial inflows, contributing to rapid real estate price growth in some segments.

“Looking ahead, the UAE economic outlook remains positive, supported by domestic activity. We expect non-hydrocarbon growth to be around 4.0 per cent in 2023 and to accelerate over the medium-term with the implementation of ongoing reforms. Inflationary pressures are projected to moderate gradually, including from the impact of tightening financial conditions. Further development of domestic capital markets, including through the issuance of local currency debt by the federal government will also support growth,” the IMF official said.

He said that fiscal and external surpluses have expanded further on the back of higher oil prices and removal of Covid-related fiscal support to businesses and households. Real estate prices have also gone up, driven by “larger financial inflows” amid ongoing global uncertainty, while banks have shown adequate capital and abundant liquidity.

“Looking ahead, the UAE economic outlook remains positive, supported by domestic activity,” Al Eyd said in a statement.

“Banks have adequate capital overall and abundant liquidity, and asset quality has improved modestly from pandemic-era peaks. Domestic private sector credit growth has improved. Real estate price developments and expected further tightening of financial conditions underscore the importance of continued close monitoring of financial stability. We welcome continued efforts by the Central Bank of the UAE to strengthen the macro-prudential framework and promote the effective management of non-performing loans,” he said.

The UAE's foreign trade for the first six months of this year exceeded Dh1 trillion, compared with Dh840 billion for the same period before the pandemic.

The tourism sector’s revenue topped Dh19 billion during the first half of this year and total hotel guests in the same period reached 12 million while growth in the number of hotel guests climbed 42 per cent, compared with the same period before the pandemic.

“Given the macroeconomic outlook, near-term policies should focus on ensuring sustainable growth and maintaining financial stability, while guarding against inflationary outcomes,” Al Eyd said.

— issacjohn@khaleejtimes.com

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