The UAE’s real gross domestic product (GDP) is projected to grow by around 4 percent in 2024, and average inflation is expected to remain close to 2 percent, stated the International Monetary Fund (IMF) in its latest statement.
The IMF stated that economic growth in the UAE is broad with robust activity in tourism, construction, manufacturing and financial services. Moreover, foreign demand for real estate, growing bilateral relations, and the country’s safe haven status continue to drive growth in housing and rent prices. In addition, they contribute to a significant increase in the UAE’s domestic liquidity.
The IMF expects the UAE’s oil GDP to also expand this year as OPEC+ output cuts ease. The impact of geopolitical tensions so far is still minimal and the country’s response to the recent flooding was rapid.
Fiscal and external surpluses
The IMF expects the UAE’s fiscal and external surpluses to remain high this year amid high oil prices. It expects the general government surplus to be around 5 percent of the GDP in 2024. Moreover, the statement highlights that the UAE’s public debt is on track to decline further towards 30 percent of GDP.
“Capital spending is expected to meet ongoing infrastructure needs, and the introduction of the corporate income tax will support non-hydrocarbon revenue with its full implementation in the coming years,” added the statement. Moreover, it expects the current account surplus to reach almost 10 percent of the country’s GDP this year.
UAE banks grow despite high interest rates
In an overview of the UAE’s banking sector, the IMF reveals that banks have considerable capital and liquidity buffers overall. Moreover, their general asset quality has improved and credit growth has remained resilient despite higher domestic interest rates. “The central bank intends to restore the reserve requirements to the historical level of 14 percent for demand deposits,” added the statement.
Furthermore, efforts to digitalize the financial system and payment landscape should continue to follow a risk-conscious approach. In addition, developing and regulating the UAE’s virtual asset industry will need careful assessment of macroeconomic and financial stability risks, added the IMF statement.
The gradual consolidation and further fiscal structural reforms will ensure the UAE’s fiscal prudence and medium-term sustainability. In addition, the economic benefits of the corporate income tax will be gradual.
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Future outlook
The UAE’s ambitious structural reform agenda will continue to prosper amidst government strategies. Moreover, it will continue to deliver strong governance frameworks and promote private sector development and green growth.
The UAE’s efforts to advance its CEPAs, attract FDI and talent, and implement the AI, digital economy and green strategies will be key for growth. Furthermore, the Emiratization program will play a critical role in closing the gender gap and modernizing social safety nets.
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