The IMF’s prediction of a 2.3 per cent fiscal deficit for the UAE this year is much lower than what many private-sector forecasters had been expecting.
A shortfall in the Government’s budget, its first since 2009, has been widely expected since oil prices slumped at the end of last year. Global oil prices averaged about US$100 a barrel last year, but this year they have been averaging about $60 a barrel.
The IMF economist Zeine Zeidane is forecasting a consolidated fiscal deficit of 2.3 per cent of the UAE’s GDP this year, compared to a 5 per cent surplus last year.
The IMF will release a full report on the UAE's economy next month. Mr Zeidane said he was expecting inflation to rise this year because of higher rents despite easing home prices in Dubai. The UAE's non-hydrocarbons (oil and gas) economy would grow 3.4 per cent, while inflation would increase 3.8 per cent this year, he said.
The IMF expects overall economic growth of 3 per cent this year, down from 4.6 per cent last year. But the fund praised the Government’s policies and continued spending on major infrastructure projects for blunting the impact of lower oil prices on economic growth.
The IMF’s detailed reports on the UAE are closely watched because the Government chooses to release detailed estimates of its spending plans through the fund, said Mathias Angonin, an analyst in the Moody’s sovereign risk group in Dubai.
Several private-sector economic forecasters had been projecting higher budget deficits than the IMF.
Although the IMF has privileged access to the Government’s spending plans, its overall deficit prediction is not necessarily more accurate than private forecasters because it avoids forecasting oil prices. Instead, it simply factors in prices of oil futures.
Monica Malik, Abu Dhabi Commercial Bank’s chief economist, has been forecasting a 4 per cent fiscal shortfall for this year, a modest deficit compared with the UAE government’s vast financial resources.
“Thanks to the reforms over the last two years, the impact of the fall in house prices in Dubai on the overall economy should be contained,” she said. The measures taken to avoid boom-and-bust in the real estate sector, which had such a negative impact during the financial crisis six years ago, meant “that non-oil GDP growth should remain respectable”, said Ms Malik.
Also, the Government’s medium-term investment programme would support the economy, she said. It focuses on transportation projects, housing projects in Abu Dhabi, new leisure parks for tourism in Dubai, healthcare and education. Abu Dhabi is also maintaining spending on energy projects, including those designed to meet domestic needs.
The IMF praised the UAE’s efforts but still made some recommendations for reform. It said the Government “should preserve investment spending, control the public wage bill, phase out subsidies while strengthening safety nets, reduce transfers to government-related entities and mobilise more non-hydrocarbon revenues”.
Many of those reform measures are being enacted, although the IMF echoes calls from the financial community for more transparency from the Government, particularly on government-related entities and their debt loads.
The pace of spending and reform depends to a large degree on oil prices and whether they stabilise or remain volatile, said Sebastien Henin, the head of asset management at The National Investor, an investment company in Abu Dhabi.
"In the past, the government had been very pragmatic and cut spending each time there was a fall in oil prices," he said. "It hasn't done so this time, but it's not clear yet whether that is because of a change in policies or because it expects oil prices to recover."
As things stand, the Government has plenty of financial flexibility to weather lower oil prices and fund minor fiscal deficits. But if oil prices do not recover, then “they will have to make some calls and implement some long-term solutions”, Mr Henin said.
The IMF’s view mirrors that and it will provide more details on the UAE’s spending in its full report next month.
amcauley@thenational.ae
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Match info
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Maratha Arabians 89-2
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Arabians won the final by eight wickets
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
Who was Alfred Nobel?
The Nobel Prize was created by wealthy Swedish chemist and entrepreneur Alfred Nobel.
- In his will he dictated that the bulk of his estate should be used to fund "prizes to those who, during the preceding year, have conferred the greatest benefit to humankind".
- Nobel is best known as the inventor of dynamite, but also wrote poetry and drama and could speak Russian, French, English and German by the age of 17. The five original prize categories reflect the interests closest to his heart.
- Nobel died in 1896 but it took until 1901, following a legal battle over his will, before the first prizes were awarded.
Bio
Age: 25
Town: Al Diqdaqah – Ras Al Khaimah
Education: Bachelors degree in mechanical engineering
Favourite colour: White
Favourite place in the UAE: Downtown Dubai
Favourite book: A Life in Administration by Ghazi Al Gosaibi.
First owned baking book: How to Be a Domestic Goddess by Nigella Lawson.
MATCH RESULT
Liverpool 4 Brighton and Hove Albion 0
Liverpool: Salah (26'), Lovren (40'), Solanke (53'), Robertson (85')
COMPANY PROFILE
Name: Qyubic
Started: October 2023
Founder: Namrata Raina
Based: Dubai
Sector: E-commerce
Current number of staff: 10
Investment stage: Pre-seed
Initial investment: Undisclosed
%3Cp%3EThe%20Department%20of%20Culture%20and%20Tourism%20-%20Abu%20Dhabi%E2%80%99s%20Arabic%20Language%20Centre%20will%20mark%20International%20Women%E2%80%99s%20Day%20at%20the%20Bologna%20Children's%20Book%20Fair%20with%20the%20Abu%20Dhabi%20Translation%20Conference.%20Prolific%20Emirati%20author%20Noora%20Al%20Shammari%2C%20who%20has%20written%20eight%20books%20that%20%20feature%20in%20the%20Ministry%20of%20Education's%20curriculum%2C%20will%20appear%20in%20a%20session%20on%20Wednesday%20to%20discuss%20the%20challenges%20women%20face%20in%20getting%20their%20works%20translated.%3C%2Fp%3E%0A
Who has been sanctioned?
Daniella Weiss and Nachala
Described as 'the grandmother of the settler movement', she has encouraged the expansion of settlements for decades. The 79 year old leads radical settler movement Nachala, whose aim is for Israel to annex Gaza and the occupied West Bank, where it helps settlers built outposts.
Harel Libi & Libi Construction and Infrastructure
Libi has been involved in threatening and perpetuating acts of aggression and violence against Palestinians. His firm has provided logistical and financial support for the establishment of illegal outposts.
Zohar Sabah
Runs a settler outpost named Zohar’s Farm and has previously faced charges of violence against Palestinians. He was indicted by Israel’s State Attorney’s Office in September for allegedly participating in a violent attack against Palestinians and activists in the West Bank village of Muarrajat.
Coco’s Farm and Neria’s Farm
These are illegal outposts in the West Bank, which are at the vanguard of the settler movement. According to the UK, they are associated with people who have been involved in enabling, inciting, promoting or providing support for activities that amount to “serious abuse”.
Green ambitions
- Trees: 1,500 to be planted, replacing 300 felled ones, with veteran oaks protected
- Lake: Brown's centrepiece to be cleaned of silt that makes it as shallow as 2.5cm
- Biodiversity: Bat cave to be added and habitats designed for kingfishers and little grebes
- Flood risk: Longer grass, deeper lake, restored ponds and absorbent paths all meant to siphon off water
Why it pays to compare
A comparison of sending Dh20,000 from the UAE using two different routes at the same time - the first direct from a UAE bank to a bank in Germany, and the second from the same UAE bank via an online platform to Germany - found key differences in cost and speed. The transfers were both initiated on January 30.
Route 1: bank transfer
The UAE bank charged Dh152.25 for the Dh20,000 transfer. On top of that, their exchange rate margin added a difference of around Dh415, compared with the mid-market rate.
Total cost: Dh567.25 - around 2.9 per cent of the total amount
Total received: €4,670.30
Route 2: online platform
The UAE bank’s charge for sending Dh20,000 to a UK dirham-denominated account was Dh2.10. The exchange rate margin cost was Dh60, plus a Dh12 fee.
Total cost: Dh74.10, around 0.4 per cent of the transaction
Total received: €4,756
The UAE bank transfer was far quicker – around two to three working days, while the online platform took around four to five days, but was considerably cheaper. In the online platform transfer, the funds were also exposed to currency risk during the period it took for them to arrive.
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The specs
Engine: 2-litre 4-cylinder and 3.6-litre 6-cylinder
Power: 220 and 280 horsepower
Torque: 350 and 360Nm
Transmission: eight-speed automatic
Price: from Dh136,521 VAT and Dh166,464 VAT
On sale: now
