## IMF Staff Concludes Visit to United Arab Emirates

_IMF News, October 16, 2023_

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## Bibliographic details
- Published: October 16, 2023

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### Growth and inflation
- 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 and external balances
- 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.

### Banking and financial stability
- 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.

### Risks and outlook
- 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.

### Structural policies and reform priorities
- 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.

### Closing
- 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).*

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## References

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_Source: https://www.imf.org/en/news/articles/2023/10/13/pr23351-uae-imf-staff-concludes-visit_