(MENAFN- Khaleej Times) The International Monetary Fund (IMF) has said that the UAE economy will grow 3.4 per cent in 2018, at the second fastest growth rate in the GCC, while an upswing in the world economy would likely gather pace into next year.
The improved outlook for the UAE follows a predicted 1.3 per cent growth in 2017 as low oil prices continued to impact all regional economies. Kuwait will record the fastest growth within the GCC at 4.1 per cent in 2018 following negative growth of 2.1 per cent in 2017.
"Fuel exporters are particularly hard hit by the protracted adjustment to lower commodity revenues," the IMF said in its World Economic Outlook report on Tuesday.
The fund said that the risk of low oil prices is affecting the economic outlook of the regional economies. As a result, Saudi Arabia will grow at 0.1 per cent 1.1 per cent respectively in 2017 and 2018, Bahrain at 1.5 per cent and 0.8 per cent, Kuwait -2.1 per cent and 4.1per cent, Oman 0.0 per cent and 3.7 per cent, and Qatar at 2.5 per cent 3.1 per cent.
"We expect to see a further pick-up in non-oil growth in 2018 and beyond as investment momentum builds ahead of Expo 2020," said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
Maurice Obstfeld, IMF Economic Counsellor and Director of Research, said while the global recovery is continuing at a faster pace, the picture is very different from early last year, when the world economy faced faltering growth and financial market turbulence.
He insisted that ambitious reforms were necessary for continued poverty reduction as the current moment presented a fleeting opportunity to act.
In all, the growth of Mena oil exporters Iran, Iraq, Algeria and the six GCC states is forecast to end this year at 1.7 per cent from 5.6 per cent in 2016.
Mena growth as a whole is projected to more than halve in 2017, from 5.1 per cent to 2.2 per cent, "on the back of a slowdown in the Islamic Republic of Iran's economy after very fast growth in 2016 and cuts in oil production in oil exporters", the IMF said.
The Washington-based fund projected the price of oil to average $50.3 a barrel in 2017, higher than the previous year, but will remain in the 50s until 2022.
Regional oil exporters have lost hundreds of billions of dollars in revenue since crude prices began to slump in mid-2014
The IMF's GDP growth projects for the UAE are more or less in line with those given by Citigroup Global at 1.7 per cent and 3.3 per cent; Emirates NBD at 2.0 per cent and 3.4 per cent; HSBC at 2.0 per cent and 2.6 per cent and JPMorgan at 1.6 per cent and 3.1 per cent, respectively for 2017 and 2018, according to the latest Focuseconomics report.
The latest World Economic Outlook has upgraded its global growth projections to 3.6 per cent for this year and 3.7 per cent for next-in both cases 0.1 percentage point above our previous forecasts, and well above 2016's global growth rate of 3.2 per cent, which was the lowest since the global financial crisis.
"We see an accelerating cyclical upswing boosting Europe, China, Japan, and the United States, as well as emerging Asia," said Obstfeld.
In July, the IMF said the introduction of a five per cent value added tax (VAT) from January 2018 would not have a "significant adverse impact" on growth. In July's outlook, the growth forecast for next year was lowered one percentage point to 3.4 per cent from 4.4 per cent in April, owing to an easing of oil growth to 3.2 per cent, compared with 6.2 per cent in the April forecast.
The IMF said for 2017, most of its upgrade owes to brighter prospects for the advanced economies, whereas for 2018's positive revision, emerging market and developing economies play a relatively bigger role.
"While most of the world is sharing in the current upswing, emerging market and low-income commodity exporters, especially energy exporters, continue to face challenges, as do several countries experiencing civil or political unrest, mostly in the Middle East, North and sub-Saharan Africa, and Latin America," said Obstfeld.
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Issac John Associate Business Editor of Khaleej Times, is a well-connected Indian journalist and an economic and financial commentator. He has been in the UAE's mainstream journalism for 35 years, including 23 years with Khaleej Times. A post-graduate in English and graduate in economics, he has won over two dozen awards. Acclaimed for his authentic and insightful analysis of global and regional businesses and economic trends, he is respected for his astute understanding of the local business scene.
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