UAE's non-oil growth to accelerate to 3 per cent next year, IMF forecasts

Economic activity in the UAE, the second-biggest Arab economy, is recovering and is likely to gain momentum next year, according to the International Monetary Fund.

The country's non-oil economic growth could exceed 1 per cent this year and further accelerate to around 3 per cent in 2020, its fastest pace since 2016, as businesses benefit from the various fiscal stimulus programmes and Dubai's hosting of Expo 2020. The six month-long event is expected to attract more than 25 million visitors
"Sustaining robust non-oil growth after Expo 2020 remains a key priority," Koshy Mathai the IMF executive who led the mission to the UAE, said. Sustained growth of the non-oil economy is "more pressing over the longer term" as global oil demand is likely to slow in the face of technological advances and policy responses to climate change, he noted.

The UAE’s overall gross domestic product would register a 2.5 per cent rise in 2020, the IMF said after concluding an Article IV Consultation with the UAE.

The Washington-based fund identified development and growth of the small and medium enterprise (SME) sector and strengthening fiscal frameworks as top priorities for the country, to ensure sufficient savings of oil wealth for future generations and the smoothing of short-term economic fluctuations.

The IMF mission lauded the steps taken to implement a comprehensive national SME development strategy. It recommended establishing a single agency responsible for SME promotion, and suggested steps to lowering start-up costs, operationalising the new insolvency framework and promoting greater financial inclusion.

“The authorities have already taken a number of important steps, including adopting a foreign direct investment (FDI) law allowing 100 per cent foreign ownership in selected sectors, and reducing or eliminating fees and penalties,” the IMF noted.

“A further strengthening and development of the financial sector should support private-sector development while mitigating risk.”