Dubai, UAE—The UAE economy is expected to grow by more than 6 percent in 2022, improving from 3.8 percent in 2021, according to the International Monetary Fund (IMF).
The country’s inflation has risen with global trends and is expected to average just over 5 percent this year, while fiscal and external surpluses have increased further, benefiting from the higher oil prices as well as the removal of the temporary COVID-crisis related fiscal support to businesses and households as the pandemic has gradually waned, the Washington-based lender said in a statement.
The IMF statement came following discussions with UAE authorities from November 2 to 17, 2022. Ali Al-Eyd, who led the IMF staff team, the UAE has seen robust growth this year. A 6 percent growth would be the highest since 2011, when the economy grew by 6.9 percent.
“The growth has been led by a strong rebound in tourism, construction and activity related to the Dubai World Expo, as well as higher oil production in line with the OPEC+ production agreements,” Al-Eyd said.
Increased global uncertainty led to larger financial inflows, contributing to rapid real estate price growth in some segments, IMF said.
“We expect non-hydrocarbon growth to be around 4 percent in 2023 and to accelerate over the medium-term with the implementation of ongoing reforms. Inflationary pressures are projected to moderate gradually, including from the impact of tightening financial conditions,” Al-Eyd said.
“Further development of domestic capital markets, including through the issuance of local currency debt by the federal government will also support growth,” he added.
The outlook is, however, subject to significant external uncertainties, including the impacts of global economic and financial headwinds, geopolitical developments, and the recently announced OPEC+ production cuts, the statement said.
Banks have adequate capital overall and abundant liquidity, and asset quality has improved modestly from pandemic-era peaks, Al-Eyd said.
“Domestic private sector credit growth has improved. Real estate price developments and expected further tightening of financial conditions underscore the importance of continued close monitoring of financial stability,” Mr Al-Eyd said.
“We welcome continued efforts by the Central Bank of the United Arab Emirates to strengthen the macroprudential framework and promote the effective management of non-performing loans.”