Dubai - Mubasher: The Institute of International Finance (IIF) expects the UAE budget deficit to narrow from 3.3% in 2016 to 1.1% of GDP in 2017 helped by higher oil prices.
Oil prices are forecasted to average $52 per barrel (pb) in 2017 as compared with $45 in 2016, according to a recent report by the IIF.
“We are forecasting non-hydrocarbon real GDP growth to rise to 2.9%, from 2.3% in 2016, due to reduced fiscal drag. The key risk is lower than expected oil prices,” the report stated.
“The UAE economy has been relatively resilient to the impact of the slump in oil prices as it has benefited from a relatively diversified economy, excellent infrastructure, political stability, and ample foreign assets.”
“Following the partial recovery in oil prices, there is a sense that the worst is behind for the UAE economy and confidence is gradually returning,” indicated the report.
In order to sustain higher growth over the medium term, further reforms are needed, including quality improvements to education and training, to raise total factor productivity (TFP) to 1.5%, it added
After sharp public spending and subsidy cuts, the focus is now shifting towards nonoil revenue raising measures, including new fees and taxes, with challenges include spillovers from slowing neighboring economies and real exchange rate appreciation.
