The UAE has been reinforcing its commitment to support the economy, particularly the non-oil private sector through several incentive programmes in recent months.
The latest direct boost to the private sector is the fee reductions for 145 services and transactions, announced by the Ministry of Human Resources and Emiratisation. The discounts are in the range of 50 to 94 per cent on visa fees and fines.
The reduction in fees and fines will certainly go a long way in reducing the operational costs related to labour recruitment and boost the presence of Emiratis in private sector enterprises.
Historically, the UAE government has never hesitated to provide a helping hand to the private sector whenever the businesses faced cyclical headwinds. The latest move follows several such incentives, including a fiscal easing in the form of increased government spending and tax/fee rebates offered by governments at federal and individual emirate levels.
In its latest report on the UAE economy, the International Monetary Fund (IMF) has lauded the recent efforts of the government in fortifying the long-term public finances while supporting short-term measures to revive economic growth through rebates on various government fees.
According to the IMF, in recent years, the UAE’s fiscal stance has become more supportive of the economic recovery with higher government spending. In May 2018, the authorities announced plans for raising investments. Abu Dhabi intends to invest Dh50 billion over three years ($13 billion or 3.5 per cent of the 2017 UAE GDP), augmenting that is Dubai government’s planned investment of $6 billion for Expo 2020.
The government’s accommodative short-term fiscal stance comes at a time when the economy is facing spare capacity and tightening financial conditions. The supportive policy towards private sector augurs well for the economy that has ample resources in terms of accumulated reserves.
Frontloading the stimulus plans while channelling expenditure into areas with high growth multipliers are sure to yield results in terms of the much-needed fillip to the non-oil economy.
The UAE authorities have already initiated a comprehensive review of fees. In many areas, they have been rationalised to give much-needed relief to businesses. Of course, stimulus need not be a one-way street. The government has the option to roll back the incentives and fiscal easing once the recovery takes hold. Large financial buffers allow UAE the luxury of fiscal consolidation gradually while mitigating any adverse impact on growth caused by economic cycles or geopolitical risk factors.