United Arab Emirates: 2014 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for the United Arab Emirates

Publication Date: July 03, 2014
Electronic Access: Free Full text (PDF file size is 1,674KB).
Use the free Adobe Acrobat Reader to view this PDF file

Summary: KEY ISSUES Economic context. Economic growth has been solid, supported by tourism, hospitality, and a rebounding real estate sector. Rapid price increases in some segments of the real estate market have prompted concerns about possible excessive risk-taking. The pace of fiscal consolidation slowed in 2013. The economic recovery, combined with higher real estate prices and a liquid banking system, has further supported the rollover of the still- large debt maturities of government-related entities (GREs). Policy Focus. Economic and financial policies should continue to aim at mitigating the risk of a renewed cycle of exuberance, and at strengthening the fiscal position. Efforts in deleveraging and restructuring GREs should continue. Macroeconomic policy mix. Fiscal plans for this year and the medium term imply appropriate countercyclical fiscal policy amid economic strengthening. Monetary policy in coming years is expected to tighten under the U.S. dollar peg, helping the United Arab Emirates (UAE) mitigate the risk of potentially large private credit growth, and could be supported by macroprudential tightening should deposit and credit growth accelerate further. Real estate. Further measures, such as setting higher fees for reselling properties within a short time, and restrictions on reselling off-plan properties, are warranted, particularly if rapid price increases continue. These measures could be supported by targeted macroprudential tightening in case real estate lending picks up further. GREs. Strengthening the coordinating mechanisms for prioritizing and sequencing major projects will be important, as is continuing to avoid new large-scale risk-taking by highly indebted GREs. Building on recent progress, upcoming debt maturities should be managed proactively; this should include timely communication and improving GREs’ transparency and governance. Financial stability. The banking system maintains significant capital and liquidity buffers. Banking system soundness should be further strengthened by gradually reducing the exposure to emirate governments and GREs of those banks exceeding recently imposed loan concentration limits, by strengthening corporate governance in banks, and by continuing to enhance the financial integrity framework.
Series: Country Report No. 14/187
Subject(s): Article IV consultation reports | Economic growth | Fiscal policy | Credit expansion | Banking sector | Economic indicators | Exchange rate assessments | Debt sustainability analysis | Staff Reports | Press releases | United Arab Emirates

Publication Date: July 03, 2014
ISBN/ISSN: 9781498326476/1934-7685 Format: Paper
Stock No: 1AREEA2014001 Pages: 56
US$18.00 (Academic Rate:
US$18.00 )
Please address any questions about this title to publications@imf.org