The International Monetary Fund (IMF) has hailed the UAE's successful vaccination campaign and efforts to resume economic activities in the country. In its latest country review, the IMF said that the UAE's economic recovery is gaining momentum in accordance with the supportive measures implemented by the government to swiftly address the impact of the COVID-19 pandemic.

The IMF's executive board held key consultations with the UAE authorities, following which the fund projected a faster real GDP growth rate of 3.5 per cent for 2022 compared to 2.2 per cent for 2021. According to the IMF, the growth rate is significantly driven by the non-oil sector which is predicted to grow at 3.4 percent this year.

The IMF said that the UAE's economic recovery is gaining momentum with the support of the leadership's early and strong response against COVID-19, supportive macroeconomic policies, and robust rebound in tourism and domestic activity in view of the Expo 2020.

"Overall GDP growth is projected at 2.2 per cent in 2021, driven by non-oil growth of 3.2 per cent. Real oil GDP growth is expected to be close to zero this year in line with the Opec+ agreement,” IMF noted in its country review.

During the medium term, the IMF has projected growth accelerating in line with the progress of structural reform efforts, increased foreign investment, and rising oil production

“Fiscal and macro-financial support have provided relief to hard-hit sectors, SMEs, those in need, and the financial system over the past year and a half, and some measures have been extended,” the fund added.

The federal government, Central Bank and local emirates also invested billions of dirhams in the first two years to support the UAE economy and strengthen large corporates and small and medium businesses to overcome the impact of the pandemic crisis.

The UAE provided Dh388 billion worth of stimulus package to boost the economic recovery. It also included Dh50 billion to strengthen liquidity in the banking sector and support the private sector amidst credit crunch caused by the pandemic restrictions.

Earlier, the UAE Central Bank forecast 4.2 percent expansion of the economy while Japan’s largest bank MUFG projected 4.9 percent growth in 2022.

Furthermore, the IMF has predicted the overall fiscal deficit to reduce to 0.7 percent of GDP in 2021 and transition into a small surplus by 2024.

IMF's executive directors further lauded the UAE authorities on managing a robust vaccination programme and prompt policy response against the impact of the pandemic to welcome the ongoing economic recovery.

As per the latest data, more than 95 percent of eligible residents in the UAE are fully vaccinated against COVID-19, while 100 percent have been administered at least one dose of the vaccine by the health sector.

Current account surplus

According to IMF executive directors, higher oil prices will facilitate growth in the UAE’s current account balance, which is predicted to increase to 10 percent of GDP in 2021. It is expected to remain positive at around 8.5 percent of GDP in the medium-term.

In the aftermath of the Ukraine-Russia tensions, oil prices have been continuously rising over the past few weeks. On Friday, Brent and WTI were trading at $91.1 and $89.53 per barrel, respectively.

The IMF also noted that the UAE’s banking sector continue to remain adequately capitalised. However, the fund stressed on continued monitoring of financial stability risks and digitalisation challenges.

The IMF’s directors also welcomed the progress made by the UAE authorities in terms of anti-money laundering and counter finance terrorism (AML/CFT) framework, encouraging to sustain the reform momentum.

In conclusion, the fund projected a potential jump in inflation from 0.6 percent last year to 2.2 percent this year.

SOURCE: Khaleej Times

LINK: https://www.khaleejtimes.com/economy/uaes-economic-recovery-gaining-momentum-imf