End-of-mission press releases include statements from IMF staff teams conveying preliminary findings after a country visit. The views expressed in this statement are those of the staff of the IMF and do not necessarily represent those of the Executive Board of the IMF. Based on the preliminary findings of this mission, staff will prepare a report which, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.
- The economic recovery has started to gain momentum, aided by the UAE’s rapid and strong response to the Covid-19 pandemic, the successful vaccination program, the increase in tourism and the activity related to the postponement of Expo 2020.
- In the future, support measures should increasingly target viable sectors and businesses and support those most in need.
- Adapting smoothly to a successful and more environmentally sustainable growth model requires reforms to achieve sustainable fiscal results and effective implementation of the ambitious structural reform agenda.
Washington, DC: An International Monetary Fund (IMF) team, led by Mr. Ali Al-Eyd, held virtual discussions with UAE authorities for the 2021 Article IV consultation from 14-28 September 2021. At the end of the mission, Mr. Al-Eyd issued the following statement:
“The United Arab Emirates acted quickly to deal with the health and economic effects of the COVID-19 pandemic, and the economic recovery has started to strengthen. Vaccinations cover nearly 95% of UAE nationals and other residents with at least one dose.
“As in other oil-exporting economies, the twin shock of COVID-19 and falling oil prices has resulted in a deep, but temporary, recession. GDP is estimated to contract by 6.1% in 2020, reflecting a decline of 6% in oil GDP and 6.2% in non-oil GDP. Sluggish global demand, falling oil prices and lower oil production under the OPEC + agreement weighed on fiscal and external balances compared to the previous year.
“For the future, a gradual recovery is expected in 2021, supported by the early and strong health response of the United Arab Emirates, the pursuit of supportive macroeconomic policies and the rebound in tourism and national activity linked to the postponement of the ‘Expo 2020, which is due to start in October. We expect non-oil GDP growth to exceed 3% this year and improve further over the medium term, while oil GDP will continue to grow as production increases. Rising oil prices will increase fiscal and external balances.
“Nonetheless, uncertainty around the recovery remains globally and in the UAE, and the overall risk balance is tilted down, with the resurgence of the pandemic being the main source of risk to the outlook. , the UAE’s strong reform momentum poses an upside risk to growth.
“For the recovery to be sustainable, protecting public health through continued vaccination and screening efforts for all nationals and residents remains the top priority. The current macroeconomic policy mix remains appropriate. In the future, however, support measures should increasingly target viable sectors and businesses and support those most in need. Further fiscal stimulus and structural reforms, such as those aimed at attracting highly skilled professionals, supporting employment in the private sector, increasing trade and foreign investment, and harnessing the benefits of technology, are expected. be prioritized and sequenced to ensure their efficiency and effectiveness, ensuring sustainable and inclusive growth. results.
“The rapid and substantial political response and clear, proactive communication from the Central Bank of the UAE has been essential throughout the crisis. The liquidity and capital of the banking system remain strong. However, business credit growth remains subdued, although personal lending has recovered and the asset quality of banks has weakened somewhat. Further impact on bank balance sheets, including from the COVID-19 crisis, could still occur. Ensuring financial stability through continuous risk monitoring will further strengthen the resilience of the financial system. Ongoing efforts to strengthen macroprudential and regulatory frameworks will further support these efforts.
“Significant efforts have been made to further strengthen the AML / CFT regime, including under the leadership of the National AML / CFT Strategy and Action Plan, and must be continued.
“In the medium term, to ensure a smooth adjustment to an environmentally sustainable global economy, reform efforts will be needed to achieve sustainable fiscal results and intergenerational equity. This requires gradual but marked fiscal consolidation in the context of a credible medium-term fiscal framework. Given the UAE’s decentralized fiscal structure, the UAE-specific fiscal anchors should first be strengthened and then carefully coordinated to ensure a unified national fiscal position.
“The UAE’s ambitious 50-year reform agenda holds great promise for achieving higher levels of diverse and inclusive economic growth in the future. This comes at an important time for the UAE as they celebrate their Golden Jubilee and seek to leverage their talent, knowledge base and vision for sustainable and smarter future growth. Achieving this result requires careful prioritization and sequencing of reforms, better integration of strategies and policies at different levels of government, and the search for a productive approach to strengthen collaboration and cooperation between different emirates. Ensuring the timely collection and dissemination of economic data will strengthen these efforts.
“The IMF team would like to express its gratitude to the authorities and other stakeholders for the open and fruitful discussions.