IMF Predicts Strong Fiscal and External Surpluses for UAE in 2024

UAE, 22 May, 2024 : The UAE's fiscal and external surpluses are projected to remain robust in 2024, driven by strong oil prices, according to the International Monetary Fund (IMF). Oil GDP growth is expected to rise, bolstered by increased crude oil production from the UAE’s Opec+ quota. The IMF noted that impacts from geopolitical tensions have been contained, and the government’s rapid response to recent flooding was effective.

The general government surplus is forecasted to be around 5% of GDP in 2024, with public debt set to decline towards 30% of GDP due to active debt management strategies. The introduction of corporate income tax will support non-hydrocarbon revenue, while capital spending will meet ongoing infrastructure needs. The current account surplus is projected to be around 9% of GDP, with overall real GDP growth at 4% and average inflation close to 2%.

The IMF highlighted broad-based economic growth in the UAE, driven by tourism, construction, manufacturing, and financial services. Strong foreign demand for real estate and increased bilateral ties are boosting housing prices and rents, contributing to domestic liquidity. UAE banks have considerable capital and liquidity buffers, with improved asset quality and resilient credit growth despite higher domestic interest rates. The Central Bank plans to restore reserve requirements for demand deposits to 14%.

Efforts to manage domestic liquidity through the Dirham Monetary Framework are welcomed, along with coordination on domestic capital market development. The IMF advised monitoring real estate sector activity and enhancing financial stability risk assessments related to climate change. The ongoing digitalization of the financial system should continue with a risk-conscious approach.

The IMF praised the UAE's progress under the National AML/CFT Strategy, which led to the country’s removal from enhanced monitoring by the Financial Action Task Force. They encouraged continued fiscal prudence supported by gradual fiscal consolidation and structural reforms to ensure medium-term sustainability.

The IMF also called for coordinated efforts to advance comprehensive economic partnership agreements (CEPAs), attract foreign direct investment (FDI) and talent, and fully implement AI, Digital Economy, and Green strategies. These should be complemented by measures to enhance access to finance, support the Emiratization program, close the gender gap, and modernize social safety nets. Improved data standards and transparency will aid economic assessment and reform implementation.

Source : www.khaleejtimes.com