Today's Edition
A.SREENIVASA REDDY (ABU DHABI)
The UAE, a key player in the Gulf Cooperation Council (GCC), continues to demonstrate robust economic resilience and growth prospects amidst regional geopolitical turbulence and evolving global economic dynamics, said a policy paper published by International Monetary Fund (IMF) on Thursday.
The UAE's real GDP growth remained strong at 3.6% in 2023, driven primarily by a buoyant non-hydrocarbon sector. Key factors included the recovery of tourism, policy support, increased capital inflows, and heightened capital spending.
On the economies of GCC countries, the IMF policy paper titled “Pursuing Visions Amid Geopolitical Turbulence: Economic Prospects and Policy Challenges for the GCC Countries,” said the GCC countries have successfully weathered recent turbulence in the Middle East, and their economic prospects remain favourable.
“The growth outlook is positive, as the envisaged easing of oil production cuts and natural gas expansion spur the recovery in the hydrocarbon sector, while the non-hydrocarbon economy continues to expand in the GCC nations,” the IMF policy paper said.
Ongoing reforms have significantly bolstered the business environment, leading to a steady expansion of the non-hydrocarbon sector in the UAE, the policy paper stressed. Tourism, a vital pillar of the UAE’s economy, has rebounded robustly, supported by global events and infrastructure development. The UAE has also attracted substantial foreign direct investment (FDI), particularly in technology, finance, and green energy sectors, as part of its diversification strategy under the "We the UAE 2031" vision.
Fiscal policies in the UAE have balanced sustainability with growth, maintaining prudent measures even during times of economic upturn. The IMF policy paper notes that the UAE’s fiscal consolidation efforts are pivotal for achieving long-term sustainability and intergenerational equity. The nation’s introduction of a 9% federal corporate income tax in 2023, along with the existing value-added tax (VAT), reflects its commitment to diversifying revenue streams beyond oil.
With public debt levels relatively low, the UAE has ample fiscal space to navigate uncertainties and invest in growth-oriented projects. “The UAE’s monetary policies remain aligned with its currency peg to the US dollar, ensuring stability in the face of global financial market fluctuations,” the IMF policy paper noted. The Central Bank of the UAE has implemented the Dirham Monetary Framework, improving liquidity management and ensuring policy transmission aligns with economic goals.
The country’s banking sector remains well-capitalised, with strong asset quality and liquidity levels. Credit demand has been resilient, even as banks tighten underwriting standards. Non-performing loan ratios have decreased, underscoring the soundness of the financial sector. These factors have helped reinforce the UAE’s position as a regional financial hub, the policy paper noted.
As part of its strategic vision, the UAE is accelerating its transition to a green economy. The nation has invested heavily in renewable energy projects, such as solar and hydrogen, aligning with its commitment to achieving net-zero emissions by 2050. Additionally, the UAE is expanding its liquefied natural gas (LNG) export capacity, positioning itself as a competitive player in low-carbon energy production.
Digitalisation also plays a critical role in the UAE’s economic agenda. Initiatives to enhance digital infrastructure and support fintech innovation are expected to drive efficiency and inclusivity across sectors. The IMF paper highlights the importance of further integrating digital solutions to boost productivity and competitiveness in the UAE’s economy.
Despite its strengths, the UAE faces medium-term challenges linked to global economic uncertainty and energy transition dynamics. The IMF warns of potential risks from geoeconomic fragmentation, prolonged oil production cuts, and global financial tightening. However, the UAE’s strong fiscal buffers and diversified economy position it well to navigate these uncertainties.
On the issue of initial public offerings (IPOs) and equity markets in the GCC, the IMF noted that the number of listed companies continued to increase in the first three quarters of 2024, with more than 30 IPOs, led by Saudi Arabia’s Tadawul stock exchange in terms of the number of IPOs, the Dubai Financial Market, the Abu Dhabi Securities Exchange, and Oman’s Muscat Stock Exchange in terms of the value of IPOs.
