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The UAE’s economy continues to grow, benefitting from strong domestic activity as its fiscal and external surpluses remain high on the back of high oil prices, the IMF said.
"Overall real GDP is expected to grow around 3.5% this year. Average inflation will remain contained at around 3% in 2023, down from 4.8% in 2022," Ali Al Eyd said in a statement on Monday following the conclusion of the recent staff visit.
The near-term outlook is positive but subject to elevated global risks and uncertainty, the fund cautioned.
“A decline in oil demand and reduced global trade and tourism from slower global growth, higher-for-longer interest rates, tighter financial conditions, or geopolitical developments would weigh on growth and pressure fiscal and external balances," IMF noted.
Following the OPEC+ production cuts, hydrocarbon GDP growth is expected to slow in 2023, but to accelerate next year with the UAE’s 2024 OPEC+ production quota increase.
Social and business-friendly reforms and the UAE’s safe haven status continue to attract foreign inflows of capital and labor, underpinning growth and contributing to elevated real estate prices, particularly in high-end segments.
“Fiscal and external surpluses remain high on the back of high oil prices. The fiscal balance is expected to be around 5% of GDP in 2023, driven by oil revenue and strong economic activity."
The phased introduction of a corporate income tax that began in June 2023 will support higher non-oil revenue over the medium term. Public debt is projected to continue to decline, falling firmly below 30% of GDP in 2023, including with the benefit of the Dubai Emirate reducing its public debt by 29 billion dirhams in line with its Public Debt Sustainability Strategy.
The current account surplus is expected to be notably above the medium-term level in 2023 and 2024.
Banks are adequately capitalised overall, but continued close monitoring of financial stability risks is needed.
(Writing by Brinda Darasha; editing by Seban Scaria)
