UAE's gross domestic product (GDP) is projected to grow at 3.6% in 2023 as the economic outlook remains positive, supported by strong domestic activity, the International Monetary Fund (IMF) said in a statement on Monday.

Non-hydrocarbon GDP is forecast to increase by 3.8% due to continued tourism activity and increased capital expenditure.

However, the outlook faces significant global uncertainties, including weaker growth, tighter financial conditions, and geopolitical developments. The implementation of enhanced UAE reform efforts poses upside risks to medium-term growth, the IMF stated.

Inflation has risen with global trends but is likely to ease to 3.4% in 2023.

 Fiscal and external surpluses are expected to remain high on the back of elevated oil prices, IMF said, adding banks are adequately capitalised and liquid overall. Yet, non-performing loans remain elevated, albeit down from recent peaks, and real estate prices have risen sharply in some segments.

The IMF noted that advancement in Comprehensive Economic Partnership Agreements (CEPAs) will boost trade and integration in global value chains and attract foreign direct investment.

(Editing by Seban Scaria seban.scaria@lseg.com)