UAE’s economic growth will accelerate to 4.4 per cent in 2018 as global growth is expected to pick up steam from 2017, driven by rebound in investment, manufacturing and trade, the International Monetary Fund said on Tuesday.
Raising its outlook for the global economy, the IMF said in its latest World Economic Outlook that growth is expected to rise to 3.5 per cent this year and 3.6 per cent in 2018, compared to 3.1 per cent last year with “buoyant financial markets and a long-awaited cyclical recovery in manufacturing and trade under way.”
“Stronger activity and expectations of more robust global demand, coupled with agreed restrictions on oil supply, have helped commodity prices recover from their troughs in early 2016,” according to a statement from the IMF, which is holding its annual spring meetings in Washington, D.C. this week.
For 2017, the IMF cut its forecast for Arabian Gulf oil producers’ economic growth as their output restraint deal is expected to wipe out any gains from higher oil prices in terms of government revenue.
“The expected growth improvements in 2017 and 2018 are broadly based,” said Maurice Obstfeld, Economic Counsellor and IMF director of the Research Department, but he added that “growth remains tepid in many advanced economies, and commodity exporters continue to struggle”.
“Commodity prices have firmed since early 2016, but at low levels, and many commodity exporters remain challenged – notably in the Middle East, Africa, and Latin America,” he added.
The IMF said that it expects real GDP growth for the seven oil-exporting countries in the Middle East of 1.9 per cent this year, which is a full percentage point lower than the 2.9 per cent growth it forecast for the group last October.
Saudi Arabia’s growth is forecast to grow at just 0.4 per cent this year, compared with a forecast last October of 2 per cent, and 1.3 per cent in 2018. The UAE’s growth forecast, which is cut to 1.5 per cent in 2017 from 2.5 per cent last year, is seen accelerating to 4.4 per cent in 2018, at the fastest pace in the region.
The UAE economy has been resilient to the impact of the slump in oil prices as it has benefited from a relatively diversified economy, excellent infrastructure, political stability and ample foreign assets, according to the Institute of International Finance.
“Sentiment has improved with firmer oil prices. We expect non-oil activity to pick up modestly in 2017 as fiscal drag eases and consumption spending rises in the second half of 2017, ahead of the introduction of value added tax [VAT] in 2018,” said Garbis Iradian, Chief Economist Africa Middle East, IIF.
Hardest hit within the region is Iraq, where growth of 0.5 per cent had been expected, but is now forecast to contract by 3.1 per cent. Also forecast to contract in 2017 is Kuwait – by 0.2 per cent, compared with a previous forecast of 2.6 per cent growth, a rebound to 3.5 per cent growth in 2018. Qatar will post 3.4 per cent growth in 2017 and 2.8 per cent in 2018.
“Higher commodity prices have provided some relief to commodity exporters and helped lift global headline inflation and reduce deflationary pressures,” the IMF said. “Financial markets are buoyant and expect continued policy support in China and fiscal expansion and deregulation in the United States. If confidence and market sentiment remain strong, short-term growth could indeed surprise on the upside.”
The IMF has warned that the euro zone economic outlook is clouded by Brexit and election uncertainties, with growth expected to be only modest overall. Growth this year in the 19-nation euro zone would be 1.7% per cent, up 0.1 per cent from its January estimate but unchanged from the 2016 performance.