IMF Staff Concludes Visit to the United Arab Emirates
IMF News, May 2, 2019
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Bibliographic details
- Published: May 2, 2019
Mission context and timeline
- Mission led by Mr. Koshy Mathai visited the United Arab Emirates (UAE) from April 23 to May 1, 2019.
- Press Release No. 19/138 dated May 2, 2019.
- End-of-Mission press release conveying preliminary IMF staff findings; the mission will not result in a Board discussion.
Recent macroeconomic developments and outlook
- The UAE economy continued to adjust in 2018 amid corporate consolidation and structural reforms in large government-related entities (GREs) and commercial banks.
- Given the dollar peg:
- the dirham appreciated against currencies of major trading partners;
- interest rates rose in general.
- External environment pressures included weaker external demand and intensified geopolitical tensions.
- Growth and sector outcomes:
- Non-oil growth slowed to 1.3 percent in 2018.
- The overall economy grew at 1.7 percent in 2018, benefiting from increased oil production.
- Emerging positive signals:
- Domestic credit growth, employment, and tourist arrivals showing improvement recently.
- Real estate sector continues to face an overhang of supply.
- Turning-point factors and outlook:
- Public spending support: a substantial amount of Expo 2020 investment should be completed by end-year; some GREs are embarking on new investment plans; implementation of emirate-level stimulus is expected to accelerate.
- External tailwinds: higher oil prices and the pause in Fed tightening.
- Growth projections: growth could exceed 2 percent this year and approach 3 percent in 2020-21.
Policy analysis and recommendations
- Overarching challenge:
- Sustaining rapid growth after Expo 2020, and without policy stimulus, will require capitalizing on new growth drivers decoupled from oil prices, which in turn requires enhanced structural reforms.
- Reduce the footprint of the public sector:
- Level the playing field between GREs and private-sector participants to boost productivity growth and foster diversification.
- Strengthen the enabling environment for SMEs.
- Build on recent reforms to encourage foreign direct investment (FDI).
- Modernize the labor market:
- Create a more competitive and less fragmented labor market to direct talent to its most productive uses.
- Support the objective of employing more nationals in the private sector while ensuring the UAE continues to attract and retain expatriate talent.
- Strengthen the financial markets:
- Recent adoption of the federal debt law is welcome.
- Issuance of local-currency government securities should proceed to establish a benchmark yield curve.
- The central bank law was another major accomplishment.
- Central Bank of the UAE (CBUAE) efforts to strengthen the financial system should continue, including moving toward Basel III and adopting International Financial Reporting Standards (IFRS) 9.
- Foster policy coordination and transparency:
- Improve information sharing among federal and emirate-level authorities and coordinate their decisions for better policy outcomes.
- Adopt a more explicit medium-term fiscal framework, involving rules guiding the balance between economic stabilization and saving for future generations.
- Share additional information on policymaking with the public to boost consumer and business confidence.
Mission engagement
- The mission met H.E. Mubarak Al Mansoori, Governor of the Central Bank of the UAE; H.E. Younis Haji Al-Khoori, Undersecretary of the Ministry of Finance; H.E. Mohamed Al Hameli, Acting Undersecretary of the Abu Dhabi Department of Finance; H.E. Khalid Al Bustani, Director General of the Federal Tax Authority; and H.E. Huda Al Hashimi, Assistant to the Director General for Strategy and Innovation at the Prime Minister’s Office, along with other senior officials and private sector representatives.
- The IMF team expressed thanks to the authorities for their hospitality and frank discussions.
Press Release No. 19/138 — May 2, 2019.