IMF Executive Board Concludes 2018 Article IV Consultation with the United Arab Emirates
IMF News, February 1, 2019
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- Published: February 1, 2019
Economic outlook and growth projections
- The economy is starting to recover from the 2015–16 slowdown caused by a decline in oil prices.
- Non-oil growth is projected to rise to 3.9 percent in 2019 and 4.2 percent in 2020.
- Overall real GDP growth is projected at around 3.7 percent for 2019–20.
- The oil sector’s prospects have improved with higher oil prices and output.
- CPI inflation (average): 4.1 (2015), 1.6 (2016), 2.0 (2017), 3.5 (2018), 1.9 (2019).
Fiscal policy stance and projections
- Fiscal easing is underway to facilitate the recovery; authorities announced plans for a fiscal stimulus over the next three years, augmenting planned investment ahead of Expo 2020.
- As private sector activity picks up and stimulus measures are phased out, fiscal consolidation is expected to resume to ensure sufficient saving of oil wealth for future generations.
- Overall fiscal balance is projected to turn to a surplus next year on higher oil prices and remain positive over the medium term.
- Public finances (percent of GDP):
- Revenue: 29.0 (2015), 28.9 (2016), 28.8 (2017), 28.2 (2018), 31.6 (2019).
- Taxes: 12.5 (2015), 8.9 (2016), 11.9 (2017), 13.3 (2018), 16.8 (2019).
- Other revenue: 16.2 (2015), 19.6 (2016), 16.6 (2017), 14.6 (2018), 14.5 (2019).
- Expenditures: 32.4 (2015), 30.9 (2016), 30.4 (2017), 29.9 (2018), 29.8 (2019).
- Expense: 29.7 (2015), 27.9 (2016), 27.8 (2017), 26.7 (2018).
- Net lending(+)/borrowing(-): -3.4 (2015), -2.0 (2016), -1.6 (2017), 1.8 (2018).
- Adjusted nonoil primary balance (percent of nonoil GDP): -27.7 (2015), -21.9 (2016), -25.7 (2017), -30.0 (2018), -27.0 (2019).
- Gross general government debt: 16.7 (2015), 19.4 (2016), 21.8 (2017), 20.9 (2018), 20.5 (2019).
External sector and reserves
- The current account surplus nearly doubled last year to 6.9 percent of GDP and is expected to rise further to nearly 8 percent of GDP by 2019 owing to higher oil revenues.
- Over the medium term, the current account surplus is projected to settle at a lower level as oil prices soften.
- Downside external risks have increased, driven by tightening global financial conditions, heightened volatility in emerging markets, geopolitical tensions, and rising protectionism.
- Selected external figures:
- Current account balance (in percent of GDP): 4.9 (2015), 6.9 (2016), 7.9 (2017), 6.9 (2018), 7.9 (2019).
- Exports and re-exports of goods (billions of U.S. dollars): 300 (2015), 295 (2016), 309 (2017), 329 (2018), 343 (2019).
- Oil exports (billions of U.S. dollars): 61 (2015), 46 (2016), 58 (2017), 75 (2018), 85 (2019).
- Imports of goods (billions of U.S. dollars): 224 (2015), 227 (2016), 229 (2017), 240 (2018), 246 (2019).
- Gross official reserves (billions of U.S. dollars): 94.0 (2015), 85.4 (2016), 95.4 (2017), 111.2 (2018), 129.5 (2019).
- External debt (percent of GDP): 67.6 (2015), 70.8 (2016), 73.5 (2017), 66.9 (2018), 64.2 (2019).
- In months of next year's imports of goods & services, net of re-exports: 6.7 (2015), 6.0 (2016), 7.6 (2017).
Banking sector and financial stability
- Although nonperforming loans rose during the slowdown, banks remain liquid and well capitalized.
- Monetary and credit indicators (annual percent change):
- Credit to private sector: 8.4 (2015), 5.8 (2016), 0.7 (2017), 5.4 (2018).
- Broad money: 5.5 (2015), 3.3 (2016), 3.6 (2017), 7.1 (2018).
- Net foreign assets: -12.8 (2015), 26.8 (2016), 32.3 (2017), 18.5 (2018).
- Net domestic assets: 11.7 (2015), -1.8 (2016), -6.3 (2017), 1.5 (2018).
Executive Board assessment and recommendations
- Directors commended the authorities for their strong policy response to the prolonged decline in oil prices, including:
- Introduction of the value-added tax (VAT).
- Stepped up structural reforms.
- Upgrading of the prudential framework.
- Directors noted improved economic prospects but stressed that external downside risks to the outlook have risen.
- Supervisory and fiscal recommendations:
- Continue efforts to bolster economic growth and safeguard macro-financial stability.
- Increase supervisory vigilance and strengthen management of contingent liabilities from borrowing by government-related enterprises, government guarantees, and public-private partnerships.
- Support economic growth in the short term and resume fiscal consolidation once the recovery takes hold to ensure sufficient savings of exhaustible oil revenue for future generations and debt sustainability.
- Continue progress in strengthening fiscal policy frameworks and coordination to realize the Vision 2021 agenda, avoid policy procyclicality, and improve risk management.
- Structural and data recommendations:
- Creating a vibrant, diversified, and knowledge-based economy requires continued reforms to boost the role of the private sector and promote talent and inclusiveness.
- Swiftly implement recently announced reforms, including the liberalization of foreign investment, while broadening and deepening policy initiatives to improve productivity and competitiveness.
- Continue progress on improving labor, fiscal, national accounts, and international investment position statistics to facilitate decision-making and enhance transparency.
- Directors welcomed implementation of the Enhanced General Data Dissemination System and other steps to improve economic statistics.
Key macroeconomic indicators (selected, as presented)
- Population: 10.1 million; nationals: 1 million.
- Per capita GDP-2017: $37,879.
- Unemployment rate: 4.2% (2009).
- Oil sector detailed figures:
- Exports of oil (incl. oil products and gas) (in billions of U.S. dollars): 61.5 (2015), 46.5 (2016), 58.1 (2017), 75.4 (2018), 84.9 (2019).
- Average crude oil export price (in U.S. dollar per barrel): 52.4 (2015), 44.0 (2016), 54.4 (2017), 71.9 (2018), 72.3 (2019).
- Nominal GDP (in billions of UAE dirhams): 1,315 (2015), 1,311 (2016), 1,405 (2017), 1,589 (2018), 1,673 (2019).
- Nominal GDP (in billions of U.S. dollars): 358 (2015), 357 (2016), 383 (2017), 433 (2018), 456 (2019).
- Real GDP (annual percent change): 5.1 (2015), 0.8 (2016), 3.7 (2017), 3.7 (2018–19 projection noted in text as around 3.7 for 2019–20).
- Investment and saving (percent of GDP):
- Gross domestic investment: 25.8 (2015), 27.1 (2016), 21.6 (2017), 22.5 (2018), 23.1 (2019).
- Total fixed capital formation: 23.4 (2015), 24.5 (2016), 19.1 (2017), 20.3 (2018), 21.0 (2019).
- Public fixed capital formation: 11.1 (2015), 11.4 (2016), 8.2 (2017), 8.5 (2018), 8.7 (2019).
- Private fixed capital formation: 12.3 (2015), 13.0 (2016), 10.9 (2017), 11.8 (2018).
- Gross national saving: 30.7 (2015), 30.8 (2016), 28.5 (2017), 29.6 (2018), 31.0 (2019).
IMF Executive Board Concludes 2018 Article IV Consultation with the United Arab Emirates (Press Release No. 19/26), February 1, 2019.