Today's Edition
KHALED AL KHAWALDEH (ABU DHABI)
Rounding off a week-long visit to the UAE, the International Monetary Fund (IMF) has reviewed its GDP forecasts for the UAE, with the organisation believing growth would remain robust hovering around 4%.
"Near-term growth is strong and expected to remain healthy at around 4% in 2025, despite lower-than-expected oil production related to OPEC+ agreements," Said Ali Al Eyd, Advisor and Mission Chief at the IMF, who led the UAE delegation's recent trip.
"Non-hydrocarbon activity is boosted by tourism, construction, public expenditure, and continued growth in financial services."
Despite previous forecasts being slightly higher, Al Eyd painted an optimistic image of the UAE economy going into the year, saying inflation would remain low at around 2% despite increasing housing and utilities costs. He praised the country's reform efforts, particularly in ensuring a smooth energy transition.
"Ongoing infrastructure investments should enhance tourism and domestic activity, while ongoing trade liberalisation, underpinned by Comprehensive Economic Partnership Agreements, should further boost trade and FDI," he added.
The review also highlighted the UAE's strong fiscal position with public debt remaining contained at approximately 30% of GDP, while projecting the current account surplus to reach 7.5% of GDP. Additionally, it noted the nation's strong international reserves which cover over 8.5 months of imports.
They found that the the banking sector continued to demonstrate resilience, with banks remaining well-capitalised and liquid overall. Asset quality was shown to have further improved in 2024, supported by robust domestic activity and strong demand for credit, despite elevated interest rates.
The IMF also noted a positive shift in banks' exposure to the real estate sector, which declined by 4 percentage points to 19.6% between December 2021 and September 2024. However, the Fund emphasised the need to closely monitor risks associated with rising house prices.
The review also welcomed ongoing enhancements to the UAE's anti-money laundering and combatting the financing of terrorism (AML/CFT) framework and the progress made under the Financial Stability Council. It recommended that the regulation and supervision of crypto-related activities adapt to market developments. Greater transparency and communication around the monetary framework were also encouraged to support liquidity management and local capital market growth.
"Advancing a medium-term fiscal framework would ensure a coordinated national fiscal stance, promote long-term sustainability, and help meet climate change-related challenges. Continued progress in improving economic data collection and dissemination will reinforce these efforts," he said.
