DUBAI — With its diversification effort working pretty well, the economy of the United Arab Emirates is forecast to be the second fastest among Gulf Cooperation Council states in 2018.
The International Monetary Fund (IMF) has said the UAE economy will grow 3.4 percent next year, second only to Kuwait which the fund said will record the fastest growth rate in GCC at 4.1 percent.
The improved outlook for the UAE follows a predicted 1.3 per cent growth in 2017 as low oil prices continued to impact all regional economies.
“Fuel exporters are particularly hard hit by the protracted adjustment to lower commodity revenues,” the IMF said in its World Economic Outlook report on Tuesday.
The IMF explained that the risk of low oil prices is affecting the economic outlook of the regional economies.
As a result, Saudi Arabia will grow at 0.1 percent and 1.1 percent, respectively, in 2017 and 2018, Bahrain at 1.5 percent and 0.8 percent, Kuwait -2.1 percent and 4.1 percent, Oman 0.0 percent and 3.7 percent, and Qatar at 2.5 percent 3.1 percent.
Abu Dhabi officials are even optimistic the UAE economy stands to gain much in big future events such as the Expo 2020.
“We expect to see a further pick-up in non-oil growth in 2018 and beyond as investment momentum builds ahead of Expo 2020,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
Maurice Obstfeld, IMF Economic Counsellor and Director of Research, said while the global recovery is continuing at a faster pace, the picture is very different from early last year, when the world economy faced faltering growth and financial market turbulence.
He insisted that ambitious reforms were necessary for continued poverty reduction as the current moment presented a fleeting opportunity to act.
The UAE economy will even outpace the growth of Mena oil exporters — Iran, Iraq, Algeria and the six GCC states – which is forecast to end this year at 1.7 percent from 5.6 percent in 2016.
Mena growth as a whole is projected to more than halve in 2017, from 5.1 percent to 2.2 percent, “on the back of a slowdown in the Islamic Republic of Iran’s economy after very fast growth in 2016 and cuts in oil production in oil exporters”, the IMF said.
The Washington-based fund projected the price of oil to average $50.3 a barrel in 2017, higher than the previous year, but will remain in the 50s until 2022.
Regional oil exporters have lost hundreds of billions of dollars in revenue since crude prices began to slump in mid-2014
The IMF’s GDP growth projects for the UAE are more or less in line with those given by Citigroup Global at 1.7 percent and 3.3 percent; Emirates NBD at 2.0 percent and 3.4 percent; HSBC at 2.0 percent and 2.6 percent and JPMorgan at 1.6 percent and 3.1 percent, respectively, for 2017 and 2018, according to the latest FocusEconomics report.
The latest World Economic Outlook has upgraded its global growth projections to 3.6 percent for this year and 3.7 percent for the next–in both cases 0.1 percentage point above our previous forecasts, and well above 2016’s global growth rate of 3.2 percent, which was the lowest since the global financial crisis.
“We see an accelerating cyclical upswing boosting Europe, China, Japan, and the United States, as well as emerging Asia,” said Obstfeld.
In July, the IMF said the introduction of a five per cent value added tax (VAT) from January 2018 would not have a “significant adverse impact” on growth. In July’s outlook, the growth forecast for next year was lowered one percentage point to 3.4 percent from 4.4 percent in April, owing to an easing of oil growth to 3.2 percent, compared with 6.2 percent in the April forecast.
The IMF said for 2017, most of its upgrade owes to brighter prospects for the advanced economies, whereas for 2018’s positive revision, emerging market and developing economies play a relatively bigger role.
“While most of the world is sharing in the current upswing, emerging market and low-income commodity exporters, especially energy exporters, continue to face challenges, as do several countries experiencing civil or political unrest, mostly in the Middle East, North and sub-Saharan Africa, and Latin America,” said Obstfeld.