The IMF has upgraded its GDP forecast for the UAE this year as the economy benefits from a strong rebound in Asia and agreement over Dubai World’s US$24.9 billion (Dh91.45bn) debt restructuring plans.
Economic expansion would reach 2.4 per cent, faster than the 1.3 per cent it previously forecast. The IMF’s latest forecasts are contained in its revised world economic outlook report released today.
Masood Ahmed, the director of the Middle East and Central Asia department of the IMF, said last month it would raise its forecast on strong demand for UAE services, “particularly in light of Asia’s rebound and the agreement on debt restructuring, which will resolve uncertainties and contribute to boosting real estate-related sectors”.
The revision is a recognition of positive news from the UAE in recent weeks.
Dubai World’s announcement of an almost unanimous agreement with creditor banks over its debt restructuring plans, successful bond sales by Dubai and Emaar Properties, and the take-over of Islamic mortgage company Tamweel have all buoyed confidence in the recovery.
Oil prices have also strengthened, reaching a five-month high above $83 yesterday.
But the fund now believes the global financial crisis had a more serious impact on the UAE economy last year than it anticipated. It shrank by 2.5 per cent, not 1 per cent as earlier forecast, the IMF said.
It added, however, that the economy would rebound to faster growth of 3.2 per cent next year.
The IMF expects the world economy to expand by 4.8 per cent this year before cooling to growth of 4.2 per cent next year, due to a temporary slowdown in the second half of this year and the first half of next.
The IMF downgraded its forecast for the MENA region to 4.1 per cent for this year, while raising its growth forecast for next year to 5.1 per cent.
The strength of the recent economic recovery in the MENA region was largely underpinned by the rebound in oil prices from their trough last year, which had helped boost receipts for oil exporters, it said.
A sizeable and rapid fiscal policy response, especially in oil-exporting economies, had helped to soften the blow of the financial crisis on the non-oil sector.
“An immediate challenge for policymakers in this region is to revive the financial intermediation process,” said the IMF report.
In many economies, credit growth had been sluggish after the downturn due to weak balance sheets for the banking and the non-financial corporate sectors.
“Prominent corporate defaults in Dubai, Kuwait, and Saudi Arabia have contributed to increased uncertainty regarding the health of the corporate sector generally,” it said.
Although an improvement in oil prices meant the current account balance of oil-exporters was expected to recover, fiscal finances would not return to pre-crisis levels, the IMF said.
The UAE’s current account balance would climb from 4 per cent of GDP last year to 5.4 and 5.6 per cent this year and next, respectively.
The IMF expects inflationary pressures in the UAE to remain muted, averaging 2 per cent this year and 2.5 per cent next year.
Qatar is anticipated be the leading growth engine in the region, with GDP of 16 per cent this year before accelerating to 18.6 per cent next year.
tarnold@thenational.ae
