UAE economic outlook is 'positive', supported by strong domestic activity, IMF says

The Dubai Creek. The UAE's economy is forecast to expand 3.3 per cent this year. AFP

The UAE's economic outlook is positive and is supported by strong domestic activity after it expanded at its fastest pace in more than a decade last year, the International Monetary Fund has said.

“UAE economic growth strengthened in 2022, benefitting from a rapid and effective Covid response, supportive fiscal measures and the benefits of earlier social and business-friendly reforms,” the Washington-based lender said on Monday at the conclusion of a consultation with Emirati officials.

On Sunday, the UAE's Federal Competitiveness and Statistics Centre said the economy grew by 7.9 per cent last year, after expanding by 3.9 per cent in 2021, supported by its non-oil sector, as the country continues with its diversification strategy.

The economy is forecast to expand by 3.3 per cent this year, reflecting oil production cuts agreed upon by Opec+ members, the UAE Central Bank said in its latest Quarterly Economic Review.

Strong reform efforts under the UAE 2050 strategies and advanced progress in comprehensive economic partnership agreements (Cepa) talks will boost trade and integration in global value chains and further attract foreign direct investment, the IMF said.

The UAE aims to boost trade and economic relations with countries around the globe and is working towards signing 26 Cepas as it seeks to attract more investment and diversify its economy.

The country has already signed Cepas with India, Cambodia, Georgia, Israel, Indonesia and Turkey. It is close to finalising a similar agreements with Kenya and has started talks with Costa Rica.

Through the agreements, the Emirates aims to eliminate unnecessary trade barriers, increase market access and set up investment and trade ventures with its partners.

It aims to deepen trade and investment ties with fast-growing economies in Asia, Africa and the Middle East, as well as attract $150 billion in foreign investment to its domestic non-oil industries and diversify its export profile.

The country aims to double the size of its economy to Dh3 trillion by 2031, with a focus on boosting non-oil exports and the tourism sector.

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  President Sheikh Mohamed delivers a speech remotely, to mark the signing of the Comprehensive Economic Partnership Agreement between the UAE and Turkey. Photo: Ryan Carter / UAE Presidential Court

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  Sheikh Mohamed follows proceedings during the signing of the agreement. Photo: Ryan Carter / UAE Presidential Court

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  Sheikh Mohamed and President Recep Tayyip Erdogan of Turkey virtually attend the ceremony as Abdulla Bin Touq, UAE Minister of the Economy, right, Mehmet Muş, Minister of Trade of Turkey, centre, and Dr Thani Al Zeyoudi, UAE Minister of State for Foreign Trade complete formalities. Photo: Hamad Al Kaabi / UAE Presidential Court

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  The signing ceremony was held on Yas Island. Photo: Hamad Al Kaabi / UAE Presidential Court

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  Mr Bin Touq, Mr Mus and Dr Al Zeyoudi, Saeed Thani Hareb Al Dhaheri, the UAE's ambassador to Turkey, and other dignitaries during the signing ceremony. Photo: Hamad Al Kaabi / UAE Presidential Court

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  The agreement is aimed at boosting trade between the two nations. Photo: Hamad Al Kaabi / UAE Presidential Court

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  Dr Al Zeyoudi told journalists in Abu Dhabi that the agreement was a also milestone for the region. Victor Besa / The National

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  Mr Bin Touq, Mr Mus and Dr Al Zeyoudi, Saeed Thani Hareb Al Dhaheri, the UAE's ambassador to Turkey, and other dignitaries during the signing ceremony. Photo: Hamad Al Kaabi / UAE Presidential Court

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  Mr Bin Touq, Mr Mus and Dr Al Zeyoudi, during the signing ceremony. Victor Besa / The National

The UAE's goods trade with the rest of the world hit $1.02 trillion in 2022, with exports and imports increasing due to higher crude oil prices, according to the World Trade Organisation's Global Trade Outlook and Statistics report released in April.

In addition to the trade partnerships, the IMF said the “benefits of artificial intelligence and digitalisation and investments in enabling infrastructure will further support economic diversification, foster a smooth energy transition and help address vulnerabilities from global decarbonisation efforts”.

It cited the UAE's “commitments to climate initiatives and a balanced approach to energy transition”.

Looking ahead, the fund said fiscal and external surpluses are expected to remain high on the back of elevated oil prices.

Banks in the Arab world's second-largest economy are adequately capitalised and liquid, while property prices have risen sharply in some segments, it said.

The fund also commended the Emirates on its “major efforts” to further strengthen its financial regulatory regime.