UAE’s economic recovery gains momentum: IMF

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The International Monetary Fund (IMF) praised the UAE for its successful vaccination program and said economic recovery in the country is accelerating with the help of government support measures by rapidly addressing the effects of the Covid-19 pandemic.

Following the conclusion of its board consultations with the UAE authorities, the fund forecast a faster real GDP growth rate of 3.5% for 2022 compared to 2.2% for 2021, driven solely by the non-oil sector which will increase to 3.4%. percent this year.

“The economic recovery is gaining momentum, supported by the UAE’s early and strong health response, continued supportive macroeconomic policies, and the rebound in tourism and domestic activity linked to the delay of Expo 2020. Overall GDP growth is expected to reach 2.2% in 2021, driven by non-oil growth of 3.2%. Real oil GDP growth is expected to be close to zero this year, in line with the OPEC+ agreement,” he said. the IMF in the review of the country.

In the medium term, the IMF expects growth to accelerate thanks to structural reform efforts, increased foreign investment and increased oil production. “Fiscal and macro-financial support has provided relief to hard-hit sectors, SMEs, people in need and the financial system over the past year and a half, and some measures have been extended,” he added.

To support the economy of the United Arab Emirates, the Federal Government, the Central Bank and the local emirates injected billions of dirhams in the first two years to help large companies and small and medium enterprises offset the impact of the pandemic.

The UAE has provided a 388 billion dirham stimulus package to support the economy, including 50 billion dirhams to boost banking sector liquidity to support the private sector amid the post-pandemic credit crunch .

Compared to the IMF’s projection of 3.5% real GDP growth for 2022, the Central Bank of the United Arab Emirates previously forecast a 4.2% expansion of the economy while Japan’s largest bank MUFG predicted growth of 4.9% in 2022.

The IMF projects that the overall budget deficit will narrow to 0.7% of GDP in 2021 and turn into a small surplus by 2024.

The fund’s executive directors praised the authorities for “a successful vaccination program and rapid policy response to combat the effects of the pandemic and welcomed the ongoing economic recovery.”

Over 95% of eligible residents in the UAE are fully immunized against Covid-19, while 100% have received at least one dose.

Current account surplus

IMF executive directors noted that higher oil prices will also benefit the UAE’s current account balance, which is expected to rise to 10% of GDP in 2021, in line with pre-crisis levels, and remain positive at around 8. .5% of GDP in the medium term.

Oil prices have steadily increased in recent months, especially after tensions between Ukraine and Russia. On Friday, Brent and WTI were trading at $91.1 and $89.53 a barrel, respectively.

The IMF also stressed that the UAE’s banking sector remains adequately capitalized, but called for continued monitoring of financial stability risks and digitalization challenges. IMF Directors also welcomed the progress made in the fight against money laundering and financial terrorism (AML/CFT) and encouraged the authorities to maintain the reform momentum.

The fund also sees a massive jump in inflation from 0.6% last year to 2.2% this year.
Source: Khaleej Times

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