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22 April 2024

IMF raises UAE growth to 4.5%

By Reuters

The International Monetary Fund (IMF) has raised its 2014 economic growth forecast for the United Arab Emirates to 4.5 per cent.

The UAE's real gross domestic product growth will remain firm and at the same level as now estimated for 2013, driven by ongoing momentum in non-oil activity. Oil-fuelled growth could be limited due to an ample global supply, the IMF said on Thursday.

"The real estate sector in particular has seen a steep recovery, with prices in the Dubai residential real estate market having increased rapidly in selected areas," said Harald Finger, the IMF's mission chief, following a staff visit.

In October, the Washington-based lender forecast that the world's No. 3 oil exporter would see inflation-adjusted GDP expand 3.9 per cent in 2014 and 4.0 per cent in 2013.

Analysts polled by Reuters this month forecast stable 4.3 per cent growth in the UAE in 2013-2015.

Growth should be aided by a number of megaprojects and Dubai's hosting of the Expo 2020 exhibition, the IMF also said.

"The authorities indicated to us that discussions are under way to deal with the coming maturities of the Dubai Financial Support Fund that are due this year," Finger told Reuters.

"It's possible that Dubai will issue (a bond) again this year based on the market situation and rollover needs."

House prices in Dubai have climbed more than 20 per cent over the past year - higher than any major global market - as billions of dollars of government real estate projects triggered a buying spree and stock market bull run.

The IMF also welcomed last year's doubling in Dubai's real estate fees to 4 per cent designed to stem the speculation.

"The (Dubai) Real Estate Regulatory Agency (Rera) is thinking about differentiated fees now to discourage further the quick re-selling or flipping particularly of off-plan property," Finger told Reuters.

The IMF also said the central bank's newly-implemented regulations on loan concentration and real estate exposure for banks will help protect the soundness of the banking system.

"Looking ahead, the Central Bank could consider further tightening these rules if price increases in the real estate market remain very large," Finger said in the statement.

Fiscal consolidation in the UAE is planned to continue in 2014, with the budget execution of the federal and emirates governments for the first nine months of 2013 broadly in line with spending plans, the IMF added.