The Executive Board of the International Monetary Fund concludes its 2022 Article IV Consultation with the United Arab Emirates
June 26, 2023
Washington, DC : The Executive Board of the International Monetary Fund has concluded the Article IV consultation
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for the year 2022 with the United Arab Emirates.
The UAE witnessed stronger economic growth during 2022 thanks to the rapid and effective response to the COVID-19 pandemic, supportive fiscal measures, and the benefits of social and other business-friendly reforms implemented by the UAE in the past. Overall growth is expected to reach 6.9% in 2022, with non-hydrocarbon GDP growth reaching 5.3%, and hydrocarbon GDP growth of 11.1% in 2022 following the OPEC+ agreement.
Inflation rose in line with global trends, although it is expected to decline to 3.4% in 2023. Fiscal and external surpluses are expected to remain high due to the increase in oil prices. Banks are generally adequately capitalized and liquid, although non-performing loans are still high, albeit down from recent peak levels, and real estate prices have also seen a sharp rise in some sectors. The tremendous efforts exerted within the framework of the “National Strategy and Action Plan to Combat Money Laundering and Combating the Financing of Terrorism” continued to move forward in strengthening the supervisory system to ensure its effectiveness in line with the enhanced control measures recommended by the Financial Action Task Force (FATF).FATF).
The economic outlook remains positive thanks to strong domestic activity. Forecasts indicate that the total GDP will grow by 3.6% in 2023, with a non-hydrocarbon growth rate of 3.8%, as a result of continued tourism activity and an increase in capital expenditures. Despite this, high global uncertainties continue to affect the economic outlook, including slower growth, further tightening of financial conditions, and geopolitical developments. The growth rate is likely to exceed expectations in the medium term thanks to the strengthening of reform efforts in the UAE.
Strong reform efforts continue within the framework of the UAE 2050 strategies. The implementation of the Comprehensive Economic Partnership Agreements will contribute to enhancing trade and integration into global value chains and attracting more foreign direct investment. In addition, the advantages of artificial intelligence, digital transformation and investments in enabling support infrastructure will support economic diversification, encourage smooth transition in the energy sector, and address vulnerabilities resulting from global efforts to reduce carbon emissions. Work is under way to address long-term vulnerabilities resulting from efforts to reduce global carbon emissions through commitment to climate initiatives and a balanced approach to achieving the desired transformation of the energy sector.
evaluationthe CouncilExecutive[2]
Executive Directors commended the UAE authorities for their effective response to the COVID-19 pandemic, their timely policy actions, and their implementation of structural reforms, which resulted in strong growth further supported by higher oil prices. However, given the high level of uncertainty and risk in the global landscape, Directors urged the authorities to further strengthen the fiscal position and strengthen the financial sector, diversify the economy, and continue to implement the reforms necessary to achieve the authorities’ ambitious green transition targets.
They also urged the directors to maintain a conservative fiscal position in the short term, while ensuring that support is targeted to the most needy groups and to consider withdrawing the remaining total financial support related to the crisis, following an approach based on good disclosure. They noted that additional fiscal reforms would broaden and diversify the revenue base and support smooth adjustment to a low-carbon economy in the future. In this regard, Directors commended the progress made in enhancing non-hydrocarbon revenues, including through corporate income tax, and called for continued improvements in spending efficiency. Directors stressed the importance of including fiscal reforms within a credible medium-term fiscal framework, based on closer coordination between fiscal frameworks in the various emirates, with the objectives, among other things, of helping to conduct limited annual fiscal adjustment on a growth-friendly basis. The directors also stressed the importance of continuing efforts to improve the transparency of public finances and to enhance governance and accountability by publishing the financial statements of the general government at the level of the various emirates and at the federal level.
Directors emphasized that ensuring the soundness of the financial system is critical to preventing risks and promoting growth over the medium term. Although banks’ balance sheets remain strong overall, there is a reason to continue to closely monitor financial stability risks and further strengthen macroprudential frameworks, due to reasons including the high level of non-performing loans, tightening financial conditions, and banks’ exposure to the real estate sector. Directors welcomed the significant efforts made within the framework of the national strategy and action plan to combat money laundering and combat the financing of terrorism, and urged continued measures to strengthen the supervisory system in line with the enhanced follow-up efforts under the umbrella of the Financial Action Task Force. To further assess the strength of the financial sector, they urged the authorities to request an update to the Financial Sector Assessment Program.
Directors welcomed the UAE’s ambitious structural reform agenda, including significant investment in digital and green initiatives to make further progress in diversifying the economy and supporting a smooth transition in energy sources towards a lower carbon level in the future. These efforts could be further strengthened by additional measures to improve the business environment and modernize the labor market, including by continuing to encourage greater participation of women. Directors welcomed the ongoing work to develop trade and economic partnerships, which is expected to strongly support the UAE’s productivity and competitiveness over time, and encouraged continued improvements in the collection and timely dissemination of economic data in order to underpin the authorities’ reform efforts.
Article IV of the IMF’s Articles of Agreement provides for bilateral discussions with member countries, usually on an annual basis. A team of fund experts visits the member country, gathers the necessary economic and financial information, and holds discussions with official officials about economic developments and policies in that country. After returning to the Fund’s headquarters, the experts prepare a report that forms the basis for the Executive Board’s discussions in this regard.
At the conclusion of the discussions, the Fund’s Managing Director, in his capacity as Chairman of the Executive Board, presents a summary of the views of the Executive Directors, which is then sent to the authorities in the member country. An explanation of the descriptive phrases used in summarizing the discussions can be found on the following website:
http://www.IMF.org/external/np/sec/misc/qualifiers.htm
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United Arab Emirates: Selected Economic Indicators, 2020-2023 |
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Membership quota: SDR 2,311.2 million (November 2022) |
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Population: 9.56 million (2021) |
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GDP per capita: $43,422 (2021) |
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Expectations |
Expectations |
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2020 |
2021 |
2022 |
2023 |
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output and prices |
(annual change %) |
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real gross domestic product |
-5.0 |
3.9 |
6.9 |
3.6 |
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Non-hydrocarbon real GDP |
-5.4 |
5.8 |
5.3 |
3.8 |
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CPI inflation (average) |
-2.1 |
0.2 |
4.9 |
3.4 |
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public resources |
(% of GDP) |
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Revenues |
28.7 |
30.4 |
35.5 |
33.0 |
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expenses |
31.1 |
26.4 |
26.3 |
27.8 |
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Net lending (+)/borrowing (-) (revenue minus expenses) |
-2.5 |
4.0 |
9.2 |
5.3 |
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Non-hydrocarbon primary balance 1/ |
-22.9 |
-20.5 |
-21.1 |
-22.6 |
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Total general government debt |
41.1 |
35.9 |
30.2 |
29.8 |
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monetary sector |
(annual change %) |
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Money in a broad sense |
4.6 |
5.8 |
9.2 |
6.8 |
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Credit to the private sector |
-2.6 |
1.5 |
7.3 |
5.2 |
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external sector |
(% of GDP, unless otherwise indicated) |
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Current account balance |
6.0 |
11.6 |
11.7 |
7.6 |
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external debt |
110.0 |
97.3 |
85.3 |
86.8 |
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Total official reserves (in billions of US dollars) 2/ |
106.5 |
127.8 |
127.8 |
130.9 |
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In months, imports of goods and services in the following year net of re-exports |
7.3 |
7.2 |
7.2 |
7.2 |
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Sources: UAE authorities; Estimates and forecasts of the International Monetary Fund experts.
1/% of non-hydrocarbon GDP, excluding IMF experts’ estimates of income from sovereign wealth fund investments, partial coverage of the accounts of the Abu Dhabi government and the Abu Dhabi Pension Fund.
2/ Excluding the estimates of the International Monetary Fund experts for the external assets of sovereign wealth funds, and including the allocations of special drawing rights for the year 2021 in the amount of 2.2 billion special drawing rights units. |
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Communication Department, International Monetary Fund
Media Relations Department
Press Affairs Officer: Wafa Amr
phone:+1 202 623 7100Email: MEDIA@IMF.org