Dubai – The UAE’s economic activity is expected to strengthen gradually in the next few years after witnessing weaker performance in 2016, the International Monetary Fund (IMF) has said in a detailed report.
Last year, the UAE’s economic growth slowed to 3 per cent, from 3.8 per cent in 2015, the IMF said. But it forecasts non-oil growth to rise 3.3 per cent this year compared to 2.7 per cent in 2016, as domestic public investment increases and global trade picks up.
Non-oil growth would remain above 3 per cent over the medium term, the IMF said, supported by accelerated investment leading up to Expo 2020.
The last year’s downturn caused by a combination of weaker oil prices and slower oil output growth, the postponement of some public infrastructure projects and a slowdown in global trade, saw inflation in the UAE plummet to 1.8 per cent, from 4.1 per cent in 2015. The IMF said the decline reflected softer domestic demand and declining rents.
“Despite continued fiscal consolidation, lower oil revenues widened the overall deficit to 4.3 per cent of GDP from 3.4 per cent of GDP in 2015,” the IMF said.
“Likewise, the current account surplus shrank to 2.4 per cent of GDP from 4.7 per cent of GDP in 2015. Although impairment charges rose amid the economic slowdown, banks remained well capitalised and liquid.”
Despite the poorer figures, the IMF said the UAE’s economy was “weathering the post-2014 oil shock well”.
It said the UAE’s financial buffers, safe-haven status, sound banks and diversified and business-friendly economy were helping it cope with the shock.
“Growth is projected to recover over the next few years, as the pace of the necessary fiscal consolidation eases, global trade regains momentum and investment, including for Expo 2020, accelerates,” the IMF said.
However, it warned there were downside risks, mainly a further sustained decline in oil prices, tighter financial conditions, a rise in protectionism and an intensification of regional conflicts.