On 30 September 2018 the IMF published a report following consultations with the United Arab Emirates under Article IV of the IMF’s articles of agreement.

The IMF expects economic growth to strengthen in the next few years supported by higher oil prices, increased government spending, and private credit growth. The IMF considers that fiscal easing is warranted in the near term but once the recovery gains momentum there should be a return to growth-friendly fiscal consolidation. Reforms to promote the private sector and strengthen policy coordination would improve medium-term prospects and diversify sources of growth.

The UAE economy has adapted to a prolonged decline in oil prices since 2014. There has been a gradual recovery in non-oil activity. Growth is projected to reach 2.9% 2018 and 3.7% in 2019. Inflation will reach around 3.5% in 2018 as a result of the introduction of the value-added tax (VAT) and should decrease later.

The government has been providing stimulus to the economy. In the medium term the economic recovery will gain momentum and a return to gradual fiscal consolidation will be preferable. The goal of fiscal consolidation would be achieved by spending efficiency and strengthening non-oil revenue, with corporate taxation in place of the system of numerous and regressive fees. The introduction of VAT in 2018 is expected to substantially strengthen and diversify government revenues.

To improve medium-term growth and job prospects and achieve a competitive knowledge-based economy requires structural reforms aimed to enhance the role of the private sector and encourage talent and innovation. The IMF report welcomes the government’s plans to liberalize foreign investment, introduce long-term visas for professionals, and ease licensing requirements and business fees. The IMF considers that the government should also promote competition, privatize nonstrategic government-related enterprises, and improve the environment for development of small and medium enterprises (SMEs) and access to finance.

Improvement of economic policy frameworks and coordination, and improvement of statistics, would help to align government policies with the Vision 2021 goals for non-oil growth and diversifying the economy. Improvements in the frequency and quality of economic statistics would support policy-making and assist business decisions.