‏UAE to touch over 6% in GDP growth in 2022, buoyed by economic tailwinds

RIYADH: The gross domestic product growth of the UAE is expected to reach over 6 percent in 2022, firmly outperforming the 3.8 percent rate registered last year, said a senior official of the International Monetary Fund. 

After discussions with the UAE authorities from Nov. 2-17, Ali Al-Eyd, the head of the 2022 Article IV Consultation, concluded that the country’s near-term growth is strong. 

“Economic growth has been robust this year, led by a strong rebound in tourism, construction and activity related to the Dubai World Expo, as well as higher oil production in line with the OPEC+ production agreements,” Al-Eyd said in a press statement. 

Fiscal and external surpluses increased further, benefiting from the higher oil prices and the pullback of the temporary COVID-related fiscal support to businesses and households as the pandemic has gradually waned. 

“Increased global uncertainty led to larger financial inflows, contributing to rapid real estate price growth in some segments,” he added. 

The non-hydrocarbon growth is also set for an upswing thanks to the ongoing measures taken by the UAE government. According to the UAE central bank estimates, the real non-hydrocarbon GDP declined by 5.7 percent in 2020. 

“We expect non-hydrocarbon growth to be around 4 percent in 2023 and to accelerate over the medium term with the implementation of ongoing reforms,” pointed out Al-Eyd. 

Nevertheless, the outlook is subject to significant external uncertainties, including the impacts of global economic and financial headwinds, geopolitical developments and the recently announced OPEC+ production cuts. But, much of it could be countered. 

“Higher oil prices and healthy fiscal buffers help mitigate risks while enhancing reform efforts would pose upside risks to medium-term growth,” added Al-Eyd. 

Also, the strong tailwinds from the banking sector are another factor that ensures financial stability. UAE banks have adequate capital and abundant liquidity. The asset quality has improved modestly from pandemic-era peaks. Domestic credit growth of private-sector has also gotten better.  

Moreover, real estate price developments and expected further tightening of financial conditions underscore the importance of continued close monitoring of the economic situation. 

“We welcome continued efforts by the Central Bank of the United Arab Emirates to strengthen the macro-prudential framework and promote the effective management of non-performing loans,” highlighted Al-Eyd. 

Significant efforts have been advanced under the National Anti-Money Laundering and Combatting Financing of Terrorism Strategy has further strengthened the regulatory regime to ensure its effectiveness, besides enhanced monitoring under the Financial Action Task Force recommendations. 

“These should be further advanced to underpin a gradual, growth-friendly fiscal consolidation in the context of a strong medium-term fiscal framework to maintain fiscal sustainability,” added Al-Eyd.