JESSI AMASON (ABU DHABI)
The UAE’s real GDP is expected to grow by around 4.0% in 2024, with average inflation remaining close to 2%, driven mainly by strong domestic activity, according to the International Monetary Fund (IMF). Led by Ali Al Eyd, an IMF staff team recently completed two weeks of discussions with UAE authorities as part of the fund’s regular Article IV consultations.
“Economic growth in the UAE is broad-based, led by robust activity in the tourism, construction, manufacturing, and financial services sectors. Foreign demand for real estate, increased bilateral and multilateral ties, and the UAE’s safe haven status continue to drive rapid growth in housing prices and an increase in rents, while adding to ample domestic liquidity,” Al Eyd said in a statement issued at the conclusion of the mission.
The IMF team projects fiscal and external surpluses to remain high, driven by relatively high oil prices. Hydrocarbon GDP growth is expected to increase in 2024, following higher crude oil production from the UAE’s OPEC+ quota increase, Al Eyd added. General government surpluses are likewise expected to fall at around 5.0% of GDP this year, and public debt is set to decline due to active debt management strategies.
“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. The current account surplus is projected at around 10% of GDP in 2024,” he said.
The impacts of external pressures, such as nearby geopolitical tensions, have been “contained”, Al Eyd said, commending the authorities’ swift response the unprecedented rainfall the country witnessed in mid-April.
Despite global risk factors, the UAE’s substantial public financial buffers provide a robust resource for risk mitigation. Federal initiatives, such as ambitious climate goals and efforts to develop low-carbon and renewable energy, supported by advanced technology and the country’s Net Zero by 2050 strategy, could “spur growth more than expected”, Al Eyd added.
Policy and Progress
Considering the country’s unique context, the IMF team recommended that policies focus on sustainable and diversified growth while maintaining financial and monetary stability, aligning with the country’s economic diversification strategies at both federal and emirate levels.
The team also praised efforts to complete the implementation of the Dirham Monetary Framework, a policy introduced by the Central Bank of the UAE to ensure financial stability and effective liquidity management through standing facilities, open market operations, liquidity insurance, and statutory reserve requirements.
“We welcome the use of the Dirham Monetary Framework to rein in domestic liquidity and encourage further efforts, as well as continued coordination with the Ministry of Finance on domestic capital market development,” Al Eyd said, adding that the team found UAE banks to have considerable capital and liquidity buffers, with improvements in asset quality and resilient credit growth.
The team also commended the UAE’s progress in financial and payment digitalisation, supported by various government initiatives, including widespread adoption of artificial intelligence and blockchain integration. Al Eyd welcomed the UAE’s recent removal from enhanced monitoring under the Financial Action Task Force, attributing this achievement to the country’s “major efforts” under the National AML/CFT Strategy and Action Plan. “Efforts to maintain fiscal prudence should be supported by gradual fiscal consolidation and further fiscal structural reforms to ensure medium-term sustainability,” Al Eyd said.
The team emphasised that the UAE’s ambitious structural reform agenda should continue to be supported by integrated government strategies and strong governance frameworks, focusing on promoting private sector development and green growth. Key recommendations in this regard largely cover efforts already underway, including advancing CEPAs, attracting FDI and talent, and fully implementing the county’s AI, Digital Economy, and Green strategies.