Staff Report
Dubai, UAE
The UAE economic growth rate is expected to ease to 3.6 percent this year, down from 6.9 percent in 2022, the International Monetary Fund (IMF) said in a latest report. The UAE Government revenue is expected to decline from Dh661.7 billion in 2022 to Dh623.8 billion this year, while the expenditure is slated to rise from Dh490.7 billion in 2022 to Dh524.6 billion this year, IMF report shows.
“The economic outlook remains positive, supported by strong domestic activity. Overall GDP is projected to grow at 3.6 percent in 2023, with non-hydrocarbon growth of 3.8 percent driven by continued tourism activity and increased capital expenditure. Nevertheless, the outlook is subject to significant global uncertainties, including weaker growth, tighter financial conditions, and geopolitical developments. The implementation of enhanced UAE reform efforts poses upside risks to medium-term growth. Strong reform efforts continue under the UAE 2050 strategies,” IMF said in its 2022 Article IV Consultation – an annual assessment on the UAE economy.
UAE’s Government-Related Entities (GREs) have about $33 billion in bonds and loans maturing in 2023 and 2024 as well as $84 billion in following years. “In addition, GREs’ borrowing from banks has been robust, increasing around 16 percent y/y in October 2022. While some GREs will benefit from higher growth and oil inflows, debt servicing costs will rise with higher interest rates, increasing balance sheet strains,” it said.
“UAE economic growth strengthened in 2022, benefitting from a rapid and effective COVID response, supportive fiscal measures, and the benefits of earlier social and business-friendly reforms. Overall growth is expected to reach 6.9 percent in 2022, with non-hydrocarbon GDP growth of 5.3 percent and hydrocarbon GDP is expected to grow by 11.1 percent in 2022, following the OPEC+ agreement.”
Inflation has risen with global trends but is expected to ease to 3.4 percent in 2023. Fiscal and external surpluses are expected to remain high on the back of elevated oil prices. Banks are adequately capitalized and liquid overall, but nonperforming loans remain elevated, albeit down from recent peaks, and real estate prices have risen sharply in some segments. Major efforts have been advanced under the National AML/CFT Strategy and Action Plan to further strengthen the regulatory regime to ensure its effectiveness, in line with the enhanced monitoring under the Financial Action Task Force recommendations.
Advancement on Comprehensive Economic Partnership Agreements (CEPAs) will boost trade and integration in global value chains and further attract Foreign Direct Investment (FDI). In addition, the benefits of artificial intelligence and digitalisation and investments in enabling infrastructure will further support economic diversification, foster a smooth energy transition, and help address vulnerabilities from global decarbonization efforts. Long-term vulnerabilities from global decarbonization efforts are being addressed through commitments to climate initiatives and a balanced approach to energy transition, it said.
Ends
