Economic activity in the UAE is expected to strengthen gradually in the next few years, following weaker performance in 2016, the International Monetary Fund (IMF) has said in a detailed analysis of the country’s economy.
The UAE’s economic growth slowed to 3 percent in 2016, from 3.8 percent in 2015, the IMF said. But it forecasts non-oil growth to rise 3.3 percent this year compared to 2.7 percent in 2016, as domestic public investment increases and global trade picks up.
Non-oil growth would remain above 3 percent over the medium term, the IMF said, supported by accelerated investment leading up to Expo 2020.
The downturn last year, caused by a combination of weaker oil prices and slower oil output growth, the postponement of some public infrastructure projects and a slowdown in global trade, saw inflation in the UAE plummet to 1.8 percent, from 4.1 percent in 2015. The IMF said the decline reflected softer domestic demand and declining rents.
“Despite continued fiscal consolidation, lower oil revenues widened the overall deficit to 4.3 percent of GDP from 3.4 percent of GDP in 2015,” the IMF said.
“Likewise, the current account surplus shrank to 2.4 percent of GDP from 4.7 percent of GDP in 2015. Although impairment charges rose amid the economic slowdown, banks remained well capitalised and liquid.”