IMF slashes 2015 UAE growth forecast to 3.2 percent
Speaking to reporters at a press briefing to update its Middle East and Central Asia Economic Outlook, Masood Ahmed, director of the Middle East and Central Asia Department said the UAE’s economy was growing slower than its earlier projections as a result of “stagnant oil output and some of the non-oil economy growth…[being] a little bit slower than it had been expected.”
The fund has kept its forecast for GDP growth in the GCC region unchanged, however, at 3.5 percent saying, these countries have managed to keep their growth rates intact by using financial buffers built up over the last decade to continue investing in the economy.
But it has warned that while the implications on growth have been limited as a result, the dip in oil revenue has had a substantial weakening effect on the external balances of these countries.
“So, to give you a number, export earnings this year, for the oil exporting countries in the region, are expected to be $380 billion lower,” said Masood. “Similarly, for their budget on average, their fiscal balances are expected to deteriorate to an average deficit of 8.5 percent of GDP. So their budgets are going to be in deficit.”
Barring Qatar and Kuwait, the fund expects all the other countries in the region to post fiscal deficits and has thus asked the Gulf countries, to begin to consolidate in the medium-term their budgets” and “moderate the pace of spending” so as to maintain a sustainable fiscal situation. It has reiterated that countries in the region must begin the process of reducing energy subsidies and also diversifying their revenue base.”
And while infrastructure spending has thus far yielded positive results, the IMF believes that as we go forward, closer attention also needs to be paid to the efficiency of public investment in the light of sustained low oil prices.