{
  "title": "IMF Executive Board Concludes 2024 Article IV Consultation with the United Arab Emirates",
  "publication": "IMF News, December 5, 2024",
  "sourceUrl": "https://www.imf.org/en/news/articles/2024/12/05/pr-24450-united-arab-emirates-imf-executive-board-concludes-2024-article-iv-consultation",
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  "summary": "On July 11, 2024, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the United Arab Emirates and considered and endorsed the staff appraisal without a meeting.",
  "publishDate": "2024-12-05",
  "sections": [
    {
      "heading": "Overview",
      "content": "- On July 11, 2024, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the United Arab Emirates and considered and endorsed the staff appraisal without a meeting.\n- Staff propose that the next Article IV consultation with the UAE follow the standard 12-month cycle."
    },
    {
      "heading": "Recent economic performance and outlook",
      "content": "- GDP growth: 3.6 percent in 2023.\n- Inflation: 1.6 percent in 2023.\n- Outlook:\n  - Overall GDP projected to grow by 3.7 percent in 2024.\n  - Overall GDP projected to grow by 4.5 percent in the medium-term.\n- Drivers:\n  - Strong domestic non-hydrocarbon activity supported by tourism, construction, manufacturing, and financial services.\n  - Contraction in hydrocarbon growth in 2023 due to OPEC+ and UAE voluntary oil production cuts; rapid expansion in hydrocarbon production expected from the UAE’s OPEC+ quota increase from 2025.\n- Fiscal and external balances: described as remaining high, supported by relatively high oil prices.\n- External risks: intensification of geopolitical tensions and geoeconomic fragmentation, abrupt global slowdown, sharp correction in global asset prices, or commodity price volatility could reduce flows of goods, capital, and tourism.\n- Upside risks: accelerated public investment (including higher hydrocarbon production) and structural reform efforts.\n- Climate: accelerated climate reforms will help the UAE meet long-term challenges from global decarbonization."
    },
    {
      "heading": "Financial sector and real estate",
      "content": "- Capital inflows: continued strong inflows reflecting commodity revenue, safe haven flows, and investment drawn by social and business-friendly reforms.\n- Central bank foreign reserves and surplus domestic liquidity: boosted by capital inflows.\n- Real estate: notable growth in real estate prices, particularly in high-end segments in Dubai, with increases in some other segments.\n- Banking sector:\n  - Bank balance sheets have strengthened further, with capital buffers well above regulatory minima.\n  - Credit has continued to grow despite policy interest rate hikes.\n  - Nonperforming loans have declined but remain elevated in the construction sector.\n- AML/CFT: major efforts under the AML/CFT Strategy and Action plan resulted in the removal of the UAE from enhanced monitoring under the Financial Action Task Force."
    },
    {
      "heading": "Executive Board assessment on financial stability and regulation",
      "content": "- Overall: banking system remains resilient to shocks, but continued close monitoring of financial stability is needed.\n- Macroprudential recommendations:\n  - Strengthen macroprudential framework and financial stability monitoring, including for the insurance sector.\n  - Finalize the Standards for Bank Real Estate Exposure with a lower threshold and implement higher capital requirements for large exposures.\n  - Consideration of a countercyclical capital buffer would further enhance banks’ resilience.\n  - Establishment of the Financial Stability Council is highly welcome and should ensure coordinated monitoring across emirates and regulatory bodies.\n  - Staff encourage the authorities to request an FSAP to support analysis and assessment of risks.\n  - Continued progress on strengthening the AML/CFT framework is essential."
    },
    {
      "heading": "Monetary policy, liquidity management, and payments",
      "content": "- Surplus liquidity: management should be strengthened through a finalized monetary framework.\n- Policy instruments:\n  - Implement the M-bill buyback program and remaining fine tuning facilities to help develop the M-Bills market, absorb surplus liquidity, and tighten transmission of policy rate changes.\n  - Efforts to develop domestic capital markets and creation of green and Islamic finance products will support domestic liquidity management and enhance climate resilience.\n- Reserve requirements: further hikes in reserve requirements beyond 14 percent should be avoided.\n- Digitalization and virtual assets:\n  - Development of an Instant Payments Platform and exploration of a CBDC should continue with careful assessment of risks and well-defined policy objectives.\n  - Initiatives to develop the virtual asset industry should be informed by careful assessment of macroeconomic and financial stability risks and ensure adequate regulatory capacity."
    },
    {
      "heading": "Fiscal policy, frameworks, and public investment",
      "content": "- Fiscal stance: sustaining fiscal prudence and reforms will balance medium-term fiscal sustainability and development objectives.\n- Policy measures and priorities:\n  - Contain current expenditure and advance tax policy reforms.\n  - Gradual removal of subsidies and measures to enhance spending efficiency to support consolidation and further declines in public debt, which remains sustainable.\n  - Finalize implementation of the CIT, phase out current fee structures, review wide-ranging incentives and exemptions, and enhance tax administration to ensure efficiency and close the tax revenue gap.\n- Fiscal frameworks:\n  - Develop harmonized medium-term fiscal (MTF) and sovereign asset-liability management (SALM) frameworks to ensure fiscal policy efficiency and strengthen transparency.\n  - Enhance and harmonize emirate-specific and federal fiscal rules and objectives in MTF frameworks to define a national fiscal stance, improve budgeting efficiency, track fiscal risks, and ensure efficient management of public investments.\n  - SALM framework will promote sound balance sheet management and inform policymaking for long-term fiscal sustainability.\n- Public investment risks: careful prioritization of reform initiatives and strategies needed to support medium-term potential growth and climate resilience while avoiding crowding out of the private sector; improve SMEs’ access to credit."
    },
    {
      "heading": "Structural reforms, labor markets, and data",
      "content": "- Reform priorities:\n  - Leverage trade and FDI, harness digitalization and AI, and integrate net zero emissions goals.\n  - Underpin reforms with robust governance frameworks, strengthen institutions, modernize labor markets, and close gender gaps.\n- Data:\n  - UAE data provision to the Fund has some gaps but remains broadly adequate for surveillance.\n  - Authorities committed to closing existing data gaps by increasing capacity, undertaking TA, and harmonizing data collection across emirates.\n  - Further progress needed to ensure compliance with the IMF’s enhanced e-GDDS and advance toward higher standards."
    },
    {
      "heading": "Key statistics",
      "content": "- Quota: SDR 2,311.2 million (June 2024)\n- Population: 9.6 million (2021)\n- Per capita GDP: $52,518 (2023)\n\nInternational Monetary Fund — Executive Board conclusion and staff appraisal, December 5, 2024.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- United Arab Emirates and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2024/12/05/pr-24450-united-arab-emirates-imf-executive-board-concludes-2024-article-iv-consultation"
    }
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    "Published: December 5, 2024",
    "On July 11, 2024, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the United Arab Emirates and considered and endorsed the staff appraisal without a meeting.",
    "Staff propose that the next Article IV consultation with the UAE follow the standard 12-month cycle.",
    "GDP growth: 3.6 percent in 2023.",
    "Inflation: 1.6 percent in 2023.",
    "Outlook:",
    "Drivers:",
    "Fiscal and external balances: described as remaining high, supported by relatively high oil prices.",
    "External risks: intensification of geopolitical tensions and geoeconomic fragmentation, abrupt global slowdown, sharp correction in global asset prices, or commodity price volatility could reduce flows of goods, capital, and tourism.",
    "Upside risks: accelerated public investment (including higher hydrocarbon production) and structural reform efforts.",
    "Climate: accelerated climate reforms will help the UAE meet long-term challenges from global decarbonization.",
    "Capital inflows: continued strong inflows reflecting commodity revenue, safe haven flows, and investment drawn by social and business-friendly reforms.",
    "Central bank foreign reserves and surplus domestic liquidity: boosted by capital inflows.",
    "Real estate: notable growth in real estate prices, particularly in high-end segments in Dubai, with increases in some other segments.",
    "Banking sector:",
    "AML/CFT: major efforts under the AML/CFT Strategy and Action plan resulted in the removal of the UAE from enhanced monitoring under the Financial Action Task Force.",
    "Overall: banking system remains resilient to shocks, but continued close monitoring of financial stability is needed.",
    "Macroprudential recommendations:",
    "Surplus liquidity: management should be strengthened through a finalized monetary framework.",
    "Policy instruments:",
    "Reserve requirements: further hikes in reserve requirements beyond 14 percent should be avoided.",
    "Digitalization and virtual assets:",
    "Fiscal stance: sustaining fiscal prudence and reforms will balance medium-term fiscal sustainability and development objectives.",
    "Policy measures and priorities:",
    "Fiscal frameworks:",
    "Public investment risks: careful prioritization of reform initiatives and strategies needed to support medium-term potential growth and climate resilience while avoiding crowding out of the private sector; improve SMEs’ access to credit.",
    "Reform priorities:",
    "Data:",
    "Quota: SDR 2,311.2 million (June 2024)",
    "Population: 9.6 million (2021)",
    "Per capita GDP: $52,518 (2023)",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[United Arab Emirates and the IMF](http://www.imf.org/external/country/ARE/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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