The UAE Central Bank revised its forecast on economic growth this year to 2 per cent from 3.5 per cent, as Opec’s third-largest producer reduced output and the global economy is expected to slow because of trade tension between the US and China.
The UAE economy accelerated 1.7 per cent last year, the latest central bank data showed.
“Signs of weaker economic growth in advanced economies as well as in some emerging markets have emerged towards the end of 2018,” the central bank said in its 2018 report.
“From the supply side of the global oil markets, Opec and non-Opec members proceeded with a decision for further reduction of their oil production.”
Crude production in the UAE, the second biggest Arab economy, averaged 3 million barrels a day last year, increasing by 1 per cent compared to a decline of 3.9 per cent in 2017, the bank said.
It predicted that oil production would continue to decline this year to an average of 3.1 million bpd, down from an average of 3.285 million bpd in the fourth quarter of last year.
It will push the oil-GDP growth to 2.7 per cent, lower than 3.7 estimates released in March.
After a slump in oil prices that began in the mid-2014, Opec+, as the alliance led by producers Saudi Arabia and Russia is called, took measures to reduce oil supplies at the start of 2017.
The conditions of the pact were reset at the start of January this year with members agreeing to collectively cut oil production by 1.2 million bpd for six months.
Opec+ will meet at the end of June in Vienna to decide whether to extend the pact. Indications are that the group will take the production cuts deeper into the second half of this year.
Compliance by Opec and its allies with voluntary cuts in crude production rose to 168 per cent in April, the highest since the limits began, Suhail Al Mazrouei, UAE Minister of Energy and Industry, said this month.
This and the global economic outlook are curbing economic growth in some oil-producing nations.
In April the International Monetary Fund revised its global growth forecasts for 2019 to 3.3 per cent from 3.5 per cent. It was the third revision by the IMF in six months.
The 2019 outlook is the weakest since the 2007-08 financial crisis. It reflects a slowdown in most advanced and some emerging economies, as export tariffs introduced by the US and China last year continue to weigh on trade and demand.
The central bank projects the UAE’s non-oil GDP, which rose 1.3 per cent in 2018, to climb to 1.8 per cent in 2019 and continue on “its upward trajectory in the subsequent years”.
The central bank forecast a 3.4 per cent rise in non-oil GDP in its quarterly report in March.
“The announced fiscal stimulus packages and the new investment law will encourage economic growth, increase consumption, reinvigorate the property market, and improve the labour markets as the investors and consumer sentiments continue to solidify,” it said in the report.
To boost growth in the non-oil sector, the government rolled out stimulus packages in line with the UAE Vision 2021.
The federal government relaxed foreign ownership requirements and introduced 10-year visas to stimulate the private sector and promote tourism.
The new regulation included job seekers, who can now obtain a six month visa, which will help companies to attract and retain talent.
The government also announced a law allowing foreign investors to own 100 per cent of companies in some sectors.
Last year Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi, and Deputy Supreme Commander of the UAE Armed Forces, approved a Dh50 billion economic stimulus package, with Dh20bn allocated to the 2019 development package.
It will help to reduce the UAE’s dependence on oil revenues and create new industries, while attracting foreign investment.
Dubai's government also introduced initiatives to stimulate growth while reducing costs in key industries such as aviation, property and education.
It decreased the cost of doing business and lowered taxes by reducing service fees for commercial entities by 50 per cent.
Dubai also cancelled 19 fees related to the aviation industry and aircraft landing permits, and waived 4 per cent late property registration fees imposed by the Dubai Land Department.