The International Monetary Fund (IMF) painted a positive picture of the future prospects of the UAE’s economy, saying it “remains positive” supported by strong domestic activity.
The IMF’s Executive Board concluded its 2022 Article IV consultation with the UAE and issued a statement on Monday evening, saying it “witnessed stronger economic growth during 2022 thanks to the rapid and effective response to the COVID-19 pandemic, supportive fiscal measures, and the benefits of social and other reforms that support the actions it has implemented in the past.”
The UAE’s Federal Competitiveness and Statistics Center said on Sunday that the economy grew by 7.9 percent last year, after expanding by 3.9 percent in 2021, supported by the non-oil sector, as the country continues its diversification strategy.
The economy is expected to grow by 3.3 percent this year, reflecting oil production cuts agreed by OPEC+ members, the UAE central bank said in its latest quarterly economic report.
Strong reform efforts under the UAE 2050 strategies and progress in the Comprehensive Economic Partnership (CEPA) talks will boost trade and integration into global value chains and attract more foreign direct investment.
The UAE is strengthening trade and economic ties with countries around the world, signing 26 comprehensive economic partnership agreements as it seeks to attract more investment and diversify its economy.
To date, the UAE has signed SEPA agreements with India, Cambodia, Georgia, Israel, Indonesia and Turkey. It is close to finalizing similar agreements with Kenya and has begun talks with Costa Rica.
Through the agreements, the UAE aims to remove unnecessary trade barriers, increase market access, and establish investment and commercial projects with its partners.
These agreements will contribute to strengthening trade and investment relations with fast-growing economies in Asia, Africa and the Middle East, as well as attracting $150 billion in foreign investment to domestic non-oil industries and diversifying their exports.
In addition to the partnership agreements, the IMF said that “the benefits of artificial intelligence, digital transformation and investments will enable supporting infrastructure in supporting economic diversification, encouraging a smooth transition in the energy sector, and addressing vulnerabilities arising from global efforts to reduce carbon emissions.” “Work is underway to address the long-term vulnerabilities of efforts to reduce global carbon emissions through a commitment to climate initiatives and a balanced approach to achieving the desired energy transition.”
Looking ahead, the IMF said fiscal and external surpluses are expected to remain high on the back of higher oil prices.
It added that banks in the second largest economy in the Arab world have sufficient capital and liquidity, but said that “there is a need to continue to closely monitor the risks to financial stability and further strengthen macroprudential frameworks, due in part to the high level of non-performing loans, tightening financial conditions, and banks’ exposure to the real estate sector.”
Commending the UAE for its “significant efforts” to strengthen its financial regulatory system, the IMF urged the authorities to further strengthen the fiscal position, further strengthen the financial sector, diversify the economy, and continue implementing the reforms necessary to achieve the authorities’ ambitious green transition targets.
It also urged them to maintain a conservative fiscal position in the near term, while ensuring that support targets those most in need.
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