Arab News, Wed, May 22, 2024 | Dhu al-Qadah 14, 1445
IMF expects UAE’s economy to grow by 4% in 2024
Emirates:
The UAE’s gross domestic product is set to expand by 4 percent this year, driven
by robust domestic activities and relatively high oil prices, an International
Monetary Fund has forecast.
In its latest Article IV end of mission statement,
the IMF noted that the Emirates is experiencing strong growth in domestic
sectors, including tourism, construction, and financial services.
The report further noted that UAE’s oil GDP will
also expand this year if the Organization of the Petroleum Exporting Countries
and its allies, collectively known as OPEC+, decide to ease the previously
proposed output cuts.
“Economic growth in the UAE is broad-based, led by
robust activity in the tourism, construction, manufacturing, and financial
services sectors. Foreign demand for real estate, increased bilateral and
multilateral ties, and the UAE’s safe haven status continue to drive rapid
growth in housing prices and an increase in rents while adding to ample domestic
liquidity,” said the IMF in the statement.
In its previous projection in April, the
organization predicted that the UAE’s economy would grow by 3.5 percent in
2024.
The UN financial agency added that the impact of
geopolitical tensions in the Emirates so far is still minimal, and the country’s
response to the recent flooding was rapid and effective.
IMF further pointed out that the inflation rate in
the UAE is expected to be contained at 2 percent in 2024.
According to the study, the UAE’s fiscal and
external surpluses are expected to remain high this year due to relatively
surging oil prices.
“The general government surplus is projected to be
around 5 percent of GDP in 2024 and public debt is on track to decline further
toward 30 percent of GDP, benefitting from active debt management strategies,”
said IMF.
It added: “Capital spending is expected to meet
ongoing infrastructure needs, and the introduction of the corporate income tax
will support non-hydrocarbon revenue with its full implementation in the coming
years. The current account surplus is projected at around 9 percent of GDP in
2024.”
The international financial institution also noted
that accelerated public and private investment and structural reforms in areas
like renewable energy and technology could further accelerate economic growth in
the Emirates.
However, the IMF noted that the UAE’s economic
outlook is subject to uncertainty and external risks, including those related
to geopolitical tensions, global growth, and commodity price volatility.
The study highlighted that banks in the Emirates
have considerable capital and liquidity buffers, while credit growth is
resilient despite higher domestic interest rates.
“The efforts to digitalize the financial system
and payment landscape are welcome and should continue to follow a risk-conscious
approach. Initiatives to develop and regulate the virtual asset industry should
be informed by a careful assessment of macroeconomic and financial stability
risks,” said the IMF.
The report concluded by saying that gradual fiscal
consolidation and further structural reforms will ensure the UAE’s economic
prudence and medium-term sustainability.