Learn how the World Bank Group is helping countries with COVID-19 (coronavirus). Find Out

publication May 1, 2019

United Arab Emirates: Economic Update – April 2019

Growth recovered to 1.6% in 2018, driven by the end of the June 2018 OPEC+ Agreement. Non-oil growth remained subdued, however. Fiscal and current accounts continued to recover. Fiscal easing is now underway to facilitate the nonoil growth recovery. However, this will be partially offset by the 2019 OPEC-mandated oil production cuts that will dampen oil-sector growth in the first half of the year. Over the medium-term the growth recovery will be driven by the government’s commitment to structural reform and stimulus plans by the large emirates.

Growth is expected to strengthen over the medium term. In 2019 however, the pace of recovery will be muted by OPEC oil production cuts in the first half of 2019. Economic growth is forecast to reach 3.2% by 2021 supported by the government’s economic stimulus plans, impetus from hosting Dubai Expo 2020 and improved growth prospects in trading partners. Inflation is projected to moderate from 3.1% in 2018 to 2.1% by 2021 as the impact of the VAT rollout dissipates. Budgets for 2019 signal spending increases. The Dh 60 billion federal budget for 2019, 17.3% higher than the 2018 budget, is the largest in the country’s history. Although oil prices are expected to be lower in 2019 than previous projections, the VAT revenue in 2019 is expected to partially mitigate the loss in oil revenues.

Key fiscal challenges include raising spending efficiency, revenue diversification, and improving policy coordination and management of fiscal risks across the Emirates. The main economic challenge relates to adapting the UAE’s successful but complex diversification model to increasing competition among services hubs and technological shifts away from carbon as an energy source as North American shale transforms the oil sector.