Dubai: The UAE’s central bank has projected growth of 2 per cent in real gross domestic product (GDP) this year, up from an estimated 1.7 per cent in 2018.
The new GDP projections are lower than International Monetary Fund (IMF) forecasts published in the fund’s latest Regional Economic Outlook report.
The IMF revised the UAE’s economic growth outlook downwards from earlier forecasts given in October 2018.
For 2019, the IMF has projected 2.8 per cent real GDP growth compared to the earlier forecast of 3.6 per cent.
According to the latest IMF projections, the UAE economy grew by 1.7 per cent in 2018 against the October forecast of 2.9 per cent for the year.
The announced fiscal stimulus packages and the new investment law will encourage economic growth, increase consumption, reinvigorate the property market, and improve the labour markets as the investors and consumer sentiments continue to solidify.
The central bank’s annual report projects that non-oil GDP economic growth in 2019 will reach 1.8 per cent, continuing its upward trajectory in subsequent years, compared to growth of 1.3 per cent in 2018.
“The announced fiscal stimulus packages and the new investment law will encourage economic growth, increase consumption, reinvigorate the property market, and improve the labour markets as the investors and consumer sentiments continue to solidify,” the central bank report said.
Even though non-oil growth is expected to reach 1.8 per cent in 2019, supported by stronger economic fundamentals, the central bank estimates that there would be deceleration in oil production consistent with the recent Opec+ agreement.
As a result, overall production in 2019 is projected at an average of 3.1 million barrels per day, down from 3.285 million barrels per day in the fourth quarter of 2018, resulting in a growth of 2.7 per cent in 2019 in hydrocarbon GDP.
Therefore, real GDP growth rate is projected to reach 2 per cent in 2019, lower than the IMF forecasts and earlier projections of the Central Bank of UAE.
The report showed annual inflation in the country rising to 3.1 per cent in 2018 from 2 per cent in the previous year, which is higher than its five-year compounded annual growth rate (CAGR) of 2.5 per cent.
The rise in inflation occurred despite the continued decline in housing prices — around 34 per cent of the consumption basket — due to the implementation of value-added tax (VAT) at the beginning of 2018.
CPI inflation was also influenced by the increase in oil prices in 2018, which was transmitted to domestic fuel prices through transportation costs.
Data for the full year showed 2018 domestic credit increased by Dh56 billion, registering a growth rate of 3.9 per cent. Underlying the increase is credit to the government and the private sector.
Credit to government-related entities continues to decline over the same period. Meanwhile, credit to the government in 2018 grew higher than the CAGR of 5.8 per cent.
The central bank’s annual report observed that structural fiscal reforms allowed Gulf economies to achieve a stable growth footing in 2018.
Real GDP growth mostly improved in 2018 and is projected to improve in 2019 on the back of more gradual fiscal consolidation enhanced by higher oil prices and the reform strategy.