Mubasher: The International Monetary Fund (IMF) said in a recent report that economic activity in the UAE is expected to strengthen gradually in the coming years with firming oil prices and other global indicators, and an easing pace of fiscal consolidation.
According to the IMF, non-oil growth is projected to rise to 3.3% in 2017 from 2.7% in 2016, the report indicated, attributing this to an increased domestic public investment and a pickup in global trade.
Over the medium term, non-oil growth is expected to remain above 3%, supported by accelerating investment in the run up to the Expo 2020. The planned value-added tax (VAT) introduction in 2018 is not expected to have a significant adverse impact on growth, the report added.
The report also noted that economic performance was subdued during most of 2016. Together with weaker oil prices and slower oil output growth, the postponement of some public infrastructure projects and a slowdown in global trade caused growth to moderate to 3% from 3.8% in 2015.
Inflation eased to 1.8% from 4.1% in 2015, reflecting softer domestic demand and declining rents, and despite continued fiscal consolidation, lower oil revenues widened the overall deficit to 4.3% of GDP from 3.4% of GDP in 2015.
Likewise, the current account surplus shrank to 2.4% of GDP from 4.7% of GDP in 2015. Although impairment charges rose amid the economic slowdown, banks remained well capitalized and liquid.
