The International Monetary Fund (IMF) has conducted a thorough investigation and evaluation of the economic conditions in the United Arab Emirates (UAE). During a recent visit, a team of IMF staff engaged in extensive discussions regarding the nation’s economic and financial development trends, future prospects, and the focal points of policies and reformsFollowing their visit, they released a comprehensive statement rich in valuable insights.

Despite the constraints imposed by the OPEC + agreement, which have led to a reduction in the UAE's oil production, this scenario poses a serious challenge for a nation that is largely reliant on its oil economyHowever, the UAE has demonstrated remarkable economic resilience through its exceptional performance in non-oil sectorsThe IMF projects that the UAE will maintain robust economic growth in the near future, with an expected growth rate hovering around 4% in 2025.

The non-oil sectors, particularly tourism, construction, public expenditure, and financial services, have emerged as powerful engines of economic growth

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In recent years, the UAE has made considerable investments in the tourism sector, capitalizing on its unique desert landscapes, luxurious hotel accommodations, and vibrant cultural activitiesIconic landmarks such as the Burj Khalifa and the Burj Al Arab in Dubai have become coveted destinations for international travelers, driving not only the tourism sector but also boosting related industries such as hospitality and dining, thus generating abundant job opportunities for the local populaceSimilarly, the construction industry has seen a meteoric rise, with modern skyscrapers springing up across the landscape, complemented by a robust infrastructure that provides solid support for economic developmentThe judicious allocation of public spending has also played an essential role in stimulating economic growth, as the government has increased investments in education, healthcare, and other sectors vital for enhancing residents' quality of life, further promoting consumption and investmentAdditionally, the UAE has established itself as a financial hub in the Middle East, thanks to its advanced financial system and strategic geographic position, attracting numerous international financial institutions to set up branches and continuously injecting vitality into economic progress.

On the price front, although there has been a rise in housing and utility costs, the IMF predicts that inflation in the UAE will stabilize around 2% by 2025. This stability can be attributed to the effective measures implemented by the UAE government regarding macroeconomic managementThrough prudent monetary and fiscal policies, the UAE has maintained relative price stability, creating favorable conditions for smooth economic development.

However, the reduction in oil production and the corresponding price fluctuations inevitably exert some influence on the economy

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The IMF has indicated that the UAE's oil revenues are expected to decline in 2025. Nevertheless, it is reassuring to note that the country's fiscal and external surpluses are projected to remain healthyFiscal surplus is expected to decrease to around 4% of GDP in 2025, down from 5% in 2024, but still within a reasonable rangePublic debt is estimated to stay at about 30% of GDP, which is manageableThe current account surplus is anticipated to reach around 7.5% of GDP, and with ample international reserves to cover over 8.5 months of imports, the UAE exhibits a strong capacity to withstand risks in international trade and finance.

The IMF also provided a positive assessment of the UAE banking sectorBanks in the UAE are well-capitalized, possess good liquidity, and have asset quality likely to improve further in the futureDespite prevailing high interest rates, robust domestic economic activity and high credit demand are effectively supporting the profitability of banksThe banking sector plays a crucial role in financing economic development, and a stable banking industry serves as a solid financial guarantee for the continuous growth of the UAE economy.

In terms of the real estate market, loans to the real estate sector from UAE banks have decreased by four percentage points from December 2021 to September 2024, now standing at 19.6%. While this demonstrates some achievement in the banks’ risk management regarding real estate, the IMF urged the UAE to remain vigilant about potential risks in this market, especially in light of the sustained increase in property pricesThe stability of the real estate market is crucial for overall economic stability, as significant fluctuations in this sector could trigger a series of chain reactions impacting financial stability and economic growth.

The IMF's statement highly commended the UAE for its efforts to promote economic reforms, asserting that these changes would provide robust support for medium-term economic growth and facilitate the UAE’s successful energy transition

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