IMF Staff Concludes Visit to United Arab Emirates

IMF News, October 16, 2023

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Non-hydrocarbon GDP growth is expected to exceed 4 percent in 2023 and to remain at a similar pace in 2024.
Overall real GDP is expected to grow around 3.5 percent in 2023.
Hydrocarbon GDP growth is expected to slow in 2023 following the OPEC+ production cuts, but to accelerate in 2024 with the UAE’s 2024 OPEC+ production quota increase.
Average inflation: expected to remain contained at around 3 percent in 2023, down from 4.8 percent in 2022.
Growth drivers highlighted: tourism, construction, and real estate related developments; social and business-friendly reforms; foreign inflows of capital and labor contributing to elevated real estate prices, particularly in high-end segments.

Fiscal balance: expected to be around 5 percent of GDP in 2023, driven by oil revenue and strong economic activity.
Corporate tax: phased introduction of a corporate income tax began in June 2023 and will support higher non-oil revenue over the medium term.
Public debt: projected to continue to decline, falling firmly below 30 percent of GDP in 2023.
Dubai Emirate action: reduced its public debt by 29 billion dirhams in line with its Public Debt Sustainability Strategy.
Current account: surplus is expected to be notably above the medium-term level in 2023 and 2024.
Fiscal recommendation: maintain a prudent overall fiscal stance amid higher oil revenue to help contain inflationary pressures.

Banks: adequately capitalized and liquid overall.
Profitability: bank profitability has increased with higher interest rates.
Credit: overall credit continues to grow, although at a slower rate.
Financial stability risks: rising real estate prices and tighter financial conditions underscore the importance of continued close monitoring.
Recommended measures:
- Continue efforts to strengthen macro-prudential and resolution and recovery frameworks.
- Promote effective management of non-performing loans.
- Advance the National AML/CFT Strategy and Action Plan.

Near-term outlook: positive but subject to elevated global risks and uncertainty.
Downside risk channels identified:
- A decline in oil demand.
- Reduced global trade and tourism from slower global growth.
- Higher-for-longer interest rates and tighter financial conditions.
- Geopolitical developments.
Mitigating factors:
- Higher oil prices.
- Healthy fiscal buffers.
- Reform efforts that pose upside risks to growth.

Continue sustained reform efforts to support medium-term growth and a smooth energy transition; emphasize prioritization and sequencing to ensure effective outcomes.
Recommended policy actions:
- Advance a medium-term fiscal framework underpinned by careful coordination of emirate-specific fiscal anchors and rules to promote long-term sustainability and help meet climate policy challenges.
- Boost private sector employment.
- Further develop the domestic capital market.
- Leverage trade and investment in digital and green initiatives to advance diversification and lift medium-term growth.
- Build on recent improvements in economic data collection, sharing, and dissemination to buttress reform and policy efforts.

IMF team expressed appreciation to the authorities and other stakeholders for open and fruitful discussions.

Source: IMF Staff Concludes Visit to United Arab Emirates — Press Release No. 23/351 (October 16, 2023).