## IMF Staff Completes 2019 Article IV Mission to the United Arab Emirates

_IMF News, November 6, 2019_

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## Bibliographic details
- Published: November 6, 2019

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### Mission visit and statement
- IMF team led by Mr. Koshy Mathai visited the UAE from October 22 to November 5, 2019, to conduct discussions for the 2019 Article IV Consultation.
- Press release date: November 6, 2019.
- Views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

### Economic outlook and near-term projections
- “Following a challenging period, the economy is recovering.”
- Non-oil growth projections:
  - “Non-oil growth could exceed 1 percent in 2019.”
  - “Non-oil growth could … pick up to around 3 percent next year, the fastest since 2016, on the back of Expo 2020 and fiscal stimulus.”
- Overall GDP growth projection:
  - “Overall GDP growth would register 2.5 percent in 2020.”
- Near-term policy stance:
  - “Given current economic conditions, the authorities’ existing stimulus is appropriate.”

### Key policy priorities identified
- Two principal priorities discussed with the authorities:
  - (i) promoting the growth of the non-oil private sector, including small and medium enterprises (SMEs);
  - (ii) strengthening fiscal frameworks to ensure both sufficient saving of oil wealth for future generations and smoothing of short-term fluctuations.
- Longer-term context:
  - Need to diversify for a post-oil future given “the likelihood that global oil demand will slow in the face of technological advances as well as policy responses to climate change.”

### Recommendations to foster non-oil private sector and SMEs
- Authorities have taken steps including adopting an FDI law allowing “100-percent foreign ownership in selected sectors,” and reducing or eliminating fees and penalties.
- Mission welcomes implementation of a comprehensive national SME development strategy and recommends particularly:
  - (i) lowering startup costs;
  - (ii) operationalizing the new insolvency framework;
  - (iii) promoting greater financial inclusion.
- Institutional recommendation:
  - Establish a single agency responsible for SME promotion, “with any possible costs to the budget recorded transparently.”

### Financial sector priorities and stability measures
- Measures to support private-sector development while mitigating risk:
  - Keep real-estate and construction exposures under prudential control.
  - Bring noncompliant large exposures down to below prudential limits.
  - Establish a track record of enforcement under the new anti-money laundering/combating the financing of terrorism (AML/CFT) framework.
  - Harness fintech—subject to stability considerations—to improve intermediation and financial inclusion.
  - Develop a benchmark yield curve.
- Mission welcomes the authorities’ request for a Financial Sector Assessment Program (FSAP) once the new banking law has been fully implemented.

### Broader structural reforms
- Reduce the footprint of government-related entities (GREs) in nonstrategic sectors to promote competition and enhance private-sector growth.
- In line with the Emiratization agenda:
  - Strengthen incentives for private employment.
  - Address public-sector compensation and benefits.

### Fiscal framework recommendations
- Need for a fiscal framework that enshrines a commitment to savings, noting current savings are “below the level required to preserve wealth for future generations.”
- Framework design principles:
  - Balance short- and long-term objectives.
  - Center frameworks around long-term fiscal anchors while allowing flexibility to smooth short-run oil price fluctuations and the non-oil business cycle.
  - Develop transparent, rules-based fiscal frameworks.
- Complementary measures:
  - Better monitoring and analysis of GRE-related contingent liabilities.
  - Establish supportive institutions like independent and technocratic fiscal councils to provide impartial advice and ensure proper implementation.

### Closing
- “The IMF team would like to express its appreciation to the authorities and other stakeholders for their hospitality and thoughtful discussions.”

*IMF Staff statement following the 2019 Article IV mission to the United Arab Emirates (press release dated November 6, 2019).*

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## References

- [United Arab Emirates and the IMF](http://www.imf.org/external/country/ARE/index.htm)
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_Source: https://www.imf.org/en/news/articles/2019/11/06/pr19398-united-arab-emirates-imf-staff-completes-2019-article-iv-mission_