## IMF Executive Board Concludes 2024 Article IV Consultation with the United Arab Emirates _IMF News, December 5, 2024_ ## Source details **Canonical URL:** [IMF Executive Board Concludes 2024 Article IV Consultation with the United Arab Emirates](https://www.imf.org/en/news/articles/2024/12/05/pr-24450-united-arab-emirates-imf-executive-board-concludes-2024-article-iv-consultation) ## Other formats - [Markdown version](/en/news/articles/2024/12/05/pr-24450-united-arab-emirates-imf-executive-board-concludes-2024-article-iv-consultation/index.md) - [Structured JSON version](/en/news/articles/2024/12/05/pr-24450-united-arab-emirates-imf-executive-board-concludes-2024-article-iv-consultation/index.json) - [Bundle manifest](/en/news/articles/2024/12/05/pr-24450-united-arab-emirates-imf-executive-board-concludes-2024-article-iv-consultation/bundle-manifest.json) ## Bibliographic details - Published: December 5, 2024 --- ### Overview - 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. ### Recent economic performance and outlook - GDP growth: 3.6 percent in 2023. - Inflation: 1.6 percent in 2023. - Outlook: - Overall GDP projected to grow by 3.7 percent in 2024. - Overall GDP projected to grow by 4.5 percent in the medium-term. - Drivers: - Strong domestic non-hydrocarbon activity supported by tourism, construction, manufacturing, and financial services. - 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. - 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. ### Financial sector and real estate - 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: - Bank balance sheets have strengthened further, with capital buffers well above regulatory minima. - Credit has continued to grow despite policy interest rate hikes. - Nonperforming loans have declined but remain elevated in the construction 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. ### Executive Board assessment on financial stability and regulation - Overall: banking system remains resilient to shocks, but continued close monitoring of financial stability is needed. - Macroprudential recommendations: - Strengthen macroprudential framework and financial stability monitoring, including for the insurance sector. - Finalize the Standards for Bank Real Estate Exposure with a lower threshold and implement higher capital requirements for large exposures. - Consideration of a countercyclical capital buffer would further enhance banks’ resilience. - Establishment of the Financial Stability Council is highly welcome and should ensure coordinated monitoring across emirates and regulatory bodies. - Staff encourage the authorities to request an FSAP to support analysis and assessment of risks. - Continued progress on strengthening the AML/CFT framework is essential. ### Monetary policy, liquidity management, and payments - Surplus liquidity: management should be strengthened through a finalized monetary framework. - Policy instruments: - 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. - Efforts to develop domestic capital markets and creation of green and Islamic finance products will support domestic liquidity management and enhance climate resilience. - Reserve requirements: further hikes in reserve requirements beyond 14 percent should be avoided. - Digitalization and virtual assets: - Development of an Instant Payments Platform and exploration of a CBDC should continue with careful assessment of risks and well-defined policy objectives. - Initiatives to develop the virtual asset industry should be informed by careful assessment of macroeconomic and financial stability risks and ensure adequate regulatory capacity. ### Fiscal policy, frameworks, and public investment - Fiscal stance: sustaining fiscal prudence and reforms will balance medium-term fiscal sustainability and development objectives. - Policy measures and priorities: - Contain current expenditure and advance tax policy reforms. - Gradual removal of subsidies and measures to enhance spending efficiency to support consolidation and further declines in public debt, which remains sustainable. - 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. - Fiscal frameworks: - Develop harmonized medium-term fiscal (MTF) and sovereign asset-liability management (SALM) frameworks to ensure fiscal policy efficiency and strengthen transparency. - 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. - SALM framework will promote sound balance sheet management and inform policymaking for long-term fiscal sustainability. - 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. ### Structural reforms, labor markets, and data - Reform priorities: - Leverage trade and FDI, harness digitalization and AI, and integrate net zero emissions goals. - Underpin reforms with robust governance frameworks, strengthen institutions, modernize labor markets, and close gender gaps. - Data: - UAE data provision to the Fund has some gaps but remains broadly adequate for surveillance. - Authorities committed to closing existing data gaps by increasing capacity, undertaking TA, and harmonizing data collection across emirates. - Further progress needed to ensure compliance with the IMF’s enhanced e-GDDS and advance toward higher standards. ### Key statistics - Quota: SDR 2,311.2 million (June 2024) - Population: 9.6 million (2021) - Per capita GDP: $52,518 (2023) *International Monetary Fund — Executive Board conclusion and staff appraisal, December 5, 2024.* --- ## References - [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) _Source: https://www.imf.org/en/news/articles/2024/12/05/pr-24450-united-arab-emirates-imf-executive-board-concludes-2024-article-iv-consultation_