8 March, 2022
UAE economy set for speedy rebound: IMF
The economy of the United Arab Emirates is ready to recover rapidly from the effects of the Covid 19 crisis, the International Monetary Fund (IMF) Board of Directors said.
“The UAE has acted swiftly to address the health and economic implications of the pandemic. Multilateral lenders said in a statement that extensive testing and containment measures helped contain the initial spread of the virus. And early vaccination efforts have resulted in the highest vaccination rates in the world.”
IMF officials said the recovery is gaining momentum, supported by the UAE’s early and strong health response, ongoing supportive macroeconomic policies, and the recovery of tourism and domestic activities associated with the postponement of the 2020 Expo. He said it was increasing.
Total GDP growth is projected to be 2.2% in 2021 and non-oil growth was 3.2%. In line with OPEC + trading, oil’s real GDP growth is expected to approach zero this year. Asset quality has deteriorated slightly, and the COVID-19 crisis could further increase balance sheet vulnerability, but banks remain well-capitalized.
The IMF pointed out that growth could accelerate in the medium term against the backdrop of structural reforms, increased foreign investment and increased oil production.
The overall budget deficit is projected to shrink to 0.7% of GDP in 2021 and become a slight surplus by 2024. These improvements reflect current and expected rises in oil prices, increased economic growth, and increased profits from modest tax reform efforts. Rising oil prices also benefit the current account.
The current account is projected to rise to 10% of GDP in 2021 in line with pre-crisis levels and remain positive at around 8.5% of GDP in the medium term.
Reforms to support growth
The IMF said a strong reform effort is underway with its ambitious UAE2050 strategy. Recent reforms to promote growth and the development of the private sector are important to promote non-oil growth, increase productivity and attract foreign investment. Careful prioritization and ordering of reforms, as well as strengthening cooperation between emirates, will be key to ensuring a higher level of future diverse, sustainable, and inclusive economic growth.
The Board welcomed the UAE’s ambitious structural reform agenda, including recent initiatives to support the development of the private sector. They said reform prioritization and timing efforts are important to increase productivity and potential growth and promote economic diversification.
In particular, the Board will consider the importance of ongoing labor market reforms, including increasing women’s participation in the labor market, strengthening economic resilience to oil shocks, and accelerating climate change mitigation and adaptation plans.
To leverage the growth story of UAE economy for your business, do get in touch with us