The Washington-based IMF says growth in the UAE is expected to pick up over the medium term thanks to expected improvements in oil prices and investment ahead of Dubais Expo 2020.
The comments came as an IMF mission completed a visit to the country on 9 May. With expected improvements in oil prices, growth is projected to pick up over the medium term, also supported by increased investment ahead of the World Expo 2020 and more favorable external conditions, said Zeine Zeidane, who led the IMF mission, at the end of the visit.
For the short term, the IMF says the UAE has mitigated the full impact of the oil price shock due to prudent macroeconomic policies from the past that have helped build large fiscal and external buffers, its diversified economy, and its safe-haven status in the region.
For 2016, growth is expected to be moderate. The growth outlook is expected to moderate in 2016 amid low oil prices, with non-hydrocarbons growth projected at 2.4 per cent due to sizeable fiscal consolidation, softer economic sentiment, and somewhat tighter monetary and financial conditions, said Zeidane.
The fiscal deficit is still expected to widen. Despite the strong policy response to adjust to the low oil price, the fiscal deficit is projected to widen in 2016 to about 7.2 per cent of GDP, before improving over the medium term, said Zeidane. The current account surplus is projected to decline to 0.3 per cent of GDP in 2016. Private sector credit growth is expected to moderate due to the slowing economy and larger fiscal financing needs.
Other recommendations made by the IMF include:
- Gradual fiscal consolidation
- Maintaining the currency peg against the dollar
- Supporting conditions for private sector credit growth
Expo will save Dubai from recession, not fuel a boom
Expo 2020 site
When Dubai secured the rights to host the France-based Bureau International des Expositions (BIEs) World Expo in late 2013, the emirate began to gear up for a white-knuckle-ride rerun of the 2003-08 period of frenetic investment and construction activity.
In 2016, the impact, although arguably more significant, will be more modest as the Expo will prevent a recession rather than create a boom.
For the six months that followed the award of the Expo, there were a series of project launches and a slew of construction contract awards. But since mid-2014, the market has slowed. Dubais property market has started creaking as new supply is delivered and lower oil prices have depleted regional liquidity that could have been used to fund new schemes. Read more