A team from the International Monetary Fund (IMF), led by Ali Al-Eyd, visited the United Arab Emirates from January 14 to 22, 2025. The purpose of the visit was to discuss economic and financial developments, future outlooks, and the country's policy and reform priorities.
Ali Al-Eyd stated that "near-term growth is strong and expected to remain healthy at around 4 percent in 2025," despite lower oil production due to OPEC+ agreements. Growth in non-hydrocarbon activities is driven by tourism, construction, public expenditure, and financial services. Strong capital inflows are contributing to demand for real estate, resulting in rising house prices across various segments. Hydrocarbon GDP is projected to grow above 2 percent this year following decisions on production cuts by OPEC+.
Al-Eyd noted that inflation should remain around 2 percent in 2025 despite increased housing and utility costs. Although hydrocarbon revenue may decline due to volatile oil prices and reduced production, fiscal and external surpluses are expected to stay comfortable. The fiscal surplus is anticipated to moderate to about 4 percent of GDP in 2025 from an estimated 5 percent last year. Non-hydrocarbon revenue is projected to rise with the implementation of corporate income tax.
Public debt remains at approximately 30 percent of GDP, while the current account surplus is projected at around 7.5 percent of GDP with international reserves covering over eight months of imports.
Banks are adequately capitalized and liquid overall with improved asset quality in 2024. Domestic activity and credit demand have supported banks' profitability amid high interest rates. Banks' exposure to real estate has decreased by four percentage points since December 2021. Continued monitoring of house price increases is advised.
Improvements in the AML/CFT framework and progress under the Financial Stability Council were acknowledged positively. Regulation of crypto-related activities should evolve alongside market developments.
Al-Eyd emphasized that "the outlook remains subject to heightened global uncertainty" due to turbulent external conditions which could affect UAE's fiscal balances and domestic activity. However, substantial financial buffers mitigate short-term risks while ongoing reforms aim for medium-term growth.
UAE's reform efforts support growth and energy transition through prioritization and sequencing for effective outcomes. Infrastructure investments are expected to enhance tourism while trade liberalization boosts trade and FDI.
The IMF team expressed appreciation for collaboration during discussions with UAE authorities.