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The UAE economy is forecast to expand further than previously expected, owing to a strong rebound in domestic activity and higher oil prices, according to the International Monetary Fund (IMF).
Overall, the UAE’s gross domestic product (GDP) growth will exceed 6% this year, up from 3.8% in 2021, while inflation is likely to average just above 5%, the Washington-based lender said. The non-hydrocarbon sector is expected to grow around 4% next year and “accelerate” over the medium term, underpinned by the government’s ongoing reforms.
The new 6% growth is higher than the previous forecast. Last month, the IMF’s World Economic Outlook said the UAE’s GDP was on track to grow 5.1% in 2022, the highest in nearly a decade.
The IMF issued the statement following discussions with UAE authorities from November 2 to 17, 2022. According to Ali Al-Eyd, who led the IMF staff team, the UAE has seen robust growth this year.
“[The growth has been] 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,” Al-Eyd 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.
However, the UAE’s economic outlook will still be subject to “significant external uncertainties”, including global economic and financial headwinds, geopolitical issues and oil production cuts. The risks will be mitigated by higher oil prices and healthy fiscal buffers.
“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.
“Real estate price developments and expected further tightening of financial conditions underscore the importance of continued close monitoring of financial stability.”
(Reporting by Cleofe Maceda; editing by Seban Scaria )
