Friday 20 April 2018

UAE likely to cut fiscal spending: IMF

Dubai, June 12, 2014

The UAE is likely to cut its fiscal spending further in 2014 as the oil and real estate-powered economy is growing strongly and private credit growth is recovering, the IMF said.

"The combined federal and emirate budgets imply further fiscal consolidation this year," the International Monetary Fund said following annual consultations. It said this was "appropriate as it would undo earlier fiscal stimulus that is no longer needed."

The budget of Abu Dhabi - which accounts for roughly three-quarters of the Opec member's overall fiscal expenditure - implies a fiscal tightening estimated at nearly 6 percent of non-oil gross domestic product, the IMF said.

The fund said cuts would be made in security, defence, and other current expenditures. Both Abu Dhabi and trade hub Dubai are aiming for gradual fiscal consolidation.

"As budget amendments in Abu Dhabi in the course of the year are likely to result in higher than initially budgeted spending, the mission projects a more moderate consolidation for 2014," the IMF said.

Abu Dhabi's fiscal consolidation was less than budgeted in 2013, driven by higher security, defence, and other current spending, the IMF said.

The UAE's overall fiscal surplus is estimated to have declined to 6.5 percent of GDP last year from 8.9 percent of GDP in 2012, leading to an estimated increase in the fiscal break-even oil price to $84 per barrel from $78 in 2012.

That still leaves the UAE, which pegs its currency to the U.S. dollar, with a comfortable fiscal cushion if oil prices soften, as analysts predict, to $106 per barrel this year and $102 in 2015 from around $109 now .

The IMF also echoed recent warnings about the risks stemming from the accelerating property sector, especially in Dubai. - Reuters

Tags: UAE | growth | IMF | Spending |

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