On July 11, 2024, the Executive Board of the International Monetary Fund (IMF) concluded its Article IV consultation with the United Arab Emirates (UAE). The board endorsed the staff appraisal without convening a formal meeting.
The UAE's economic growth remains robust, primarily driven by strong domestic activity. Non-hydrocarbon sectors have benefited from healthy tourism flows and increased activities in construction, manufacturing, and financial services. This has offset a contraction in hydrocarbon growth due to OPEC+ and UAE voluntary oil production cuts, resulting in an overall GDP growth of 3.6 percent in 2023. Inflation decreased significantly to 1.6 percent during the same period.
The country continues to experience strong capital inflows, supported by commodity revenue and investment drawn by social and business-friendly reforms. This has bolstered central bank foreign reserves and surplus domestic liquidity while contributing to real estate price growth, particularly in Dubai's high-end segments. Bank balance sheets have strengthened with capital buffers exceeding regulatory minima, despite policy interest rate hikes. Although nonperforming loans have declined, they remain elevated in the construction sector.
Efforts under the anti-money laundering/combatting financing of terrorism (AML/CFT) strategy led to the removal of the UAE from enhanced monitoring under the Financial Action Task Force.
The economic outlook for the UAE remains positive, supported by domestic non-hydrocarbon activity and continued reforms. Overall GDP is projected to grow by 3.7 percent in 2024 and 4.5 percent in the medium term. Fiscal and external surpluses are expected to remain high due to relatively high oil prices.
However, uncertainties persist due to potential geopolitical tensions or global economic slowdowns that could impact goods flow, capital, and tourism. Accelerated public investment or structural reform efforts could pose upside risks to medium-term growth.
In their assessment of the consultation with the UAE, IMF Executive Directors noted: "Economic growth is positive, driven by strong domestic activity and sustained efforts to modernize and diversify the economy." They emphasized that "the banking system remains resilient," but stressed "continued close monitoring of financial stability" is necessary.
They also highlighted that "sustaining fiscal prudence and reforms will balance medium-term fiscal sustainability," urging careful prioritization of reform initiatives for potential growth support.
Furthermore, maintaining momentum in data collection was underscored as a priority: "Maintaining momentum in data collection and dissemination efforts should be a top priority."
The IMF staff proposes that the next Article IV consultation with the UAE follow a standard 12-month cycle.