Obaid Humaid Al Tayer, Minister of State for Financial Affairs
The International Monetary Fund (IMF) recently issued the delegation’s final statement on Article IV discussions pertaining to the assessment of state members’ financial and economic performance. The delegation’s meetings with the UAE were held from 30 April to 15 May 2013.
The report cited the positive indicators of the UAE’s overall economy. In fact, the delegation projected a GDP growth rate of 3.6% for the UAE in 2013, which is a result of economic activities supported by investments, trade, tourism and logistics support. This growth is expected to rise to 3.7 % in 2014 and 3.8% in 2015.
Commenting on the concluding statement of the IMF report, HE ObaidHumaid Al Tayer, Minister of State for Financial Affairs at MoF, said: “The Ministry of Finance believes in the importance ofmaintaining relations with other organisations and the international financial community due to the positive effect this has on the economic and financial system in the UAE and in strengthening its position on the world map and attract investments.”
HE added: “The final report of the IMF gave away a clear picture of the UAE’s economy. In fact, the report highlighted a notable recovery from the financial crises that engulfed the world, where the economy is actually witnessing strong growth which guarantees a solid business environment for investors that is supported by legislations able to support it and to aid it in achieving more growth.”
As detailed in the report, non-oil growth is expected to further grow in 2013 to reach a ratio of 4.3 %. This is to be supported by a recovery in construction and real estate as well as ongoing growth in tourism- oriented sectors with an expansion of hydrocarbon production by 5.2%. In addition, the surplus of the current account rose to 17% from the national GDP in 2012. This growth was caused by a rise in oil prices, in addition to the recovery for non-oil exports.
Moreover, the delegation’s report indicated the decrease of the inflation rate to a ratio amounting for 0.7% compared to 0.9% of the GDP in 2011. The delegation is anticipating an increase of the inflation rate to 2% in 2013, followed by an increase of 2.4% in 2014 and 2.5% in 2015.
The total amount of exports is set to reach USD 367 billion in 2013 and will continue to rise to attain an amount of USD 393 billion by 2014 followed by USD 420 billion in 2015. This compares to a rate of USD 299 billion in 2011 and USD 347 billion in 2012. In line with the expected medium term recovery in the non-oil sector, the sector will grow by 4.2% in 2015, whereby the delegation projects a rise in the export sector to a total amount of USD 109,120, 134 billion for the years 2013, 2014 and 2015 consecutively, compared to a total amount of USD 96 billion in 2012 and nearly USD 71 billion in 2011.
The IMF delegation expected domestic investments to rise to 15.6% of the GDP in 2013 and to reach a total ratio of 17 % in 2014 and 18.7% in 2015, compared to 14.2% for the year 2012 and 16.2% in 2011. These were distributed between public investments (6.1%) and non- governmental investments (12.6%). These percentages place the UAE as a safe haven for investments and investors.
The report also shed light on the Ministry’s role in the coordination of fiscal policies and its commitment to strengthening medium and short term financial coordination. The delegation also praised the significant progress witnessed in the information exchange between federal governmentand Emirates’ governmentsfacilitated bythe Fiscal Policy Coordination Council (FPCC).
The positive steps taken by the federal government to further strengthen the UAE’s economy through macroeconomic policies, along with the policies which support the financial sector’s stability, lead to the economy’s recovery and strengthened the state’s ability to overcome the barriers of the global financial crisis.
Thus, the economic prospects remain bright over the medium period, whereby the Emirate of Abu Dhabi strives to expand its economic diversification strategy which is based on the industry, aviation, renewable energy, and tourism sectors in addition to an expansion in its oil production capacity. As for the Emirate of Dubai, it has succeeded in becoming a center for services and industrial growth in the region since a number of plans for projects in the real estate and tourism sectors are bound to happen, particularly in Mohammed Bin Rashid City.
The delegation of the IMF report praised the federal government’s efforts to rationalise all spending and their aim to create a medium term fiscal framework for the UAE. In fact, the UAE adopted a medium term budget to reflect the federal strategy which includes the use of modern methods for the process of budget preparation and revenue expectations. In the meantime, Abu Dhabi developed a medium term macroeconomic model over the medium term, while Dubai put in place a three-year budget framework to guide the budgeting process. This is set to activate the role of the expansionary fiscal policies in macroeconomic management and to promote domestic liquidity and financial sustainability. Therefore, it is required to further develop the medium term fiscal framework and to continue supporting the budget formulation process.
The report also predicted that the UAE will continue consolidating its finances in 2013 through the rationalization of capital spending.