15 November 2019


Full Report


  • Public expenditure for Expo 2020 will see increased growth next year, but this is unlikely to be sustained over longer term
  • Government will continue efforts to attract foreign investment by introducing further business-friendly measures over coming years
  • Investors will nonetheless remain cautious, given UAE will continue to suffer negative impacts of US-China dispute and dampened Iranian trade



The IMF reported preliminary findings on 6 November following its Article IV consultation visit to the UAE, stating that economic activity is recovering and that it expects a non-hydrocarbon growth rate of around 3% in 2020. The Fund also predicted a total growth rate of 2.5%, which would be a 0.8% increase from 2018. The report welcomed government attempts to boost economic activity, but specifically noted the importance of maintaining growth after the major business forum Expo 2020, which is scheduled to begin in October 2020 and last six months, concludes.

The Government, facing sluggish growth rates – with IMF figures showing an average of just 1.36% per annum between 2016 and 2019 – has sought to stimulate the economy by both increasing foreign trade and creating a more attractive domestic business environment over recent years. This approach was typified in recent months by the visit of a 240-strong delegation to China between 21-23 July to deepen commercial ties with Beijing, alongside plans announced on 2 July to allow 100% foreign ownership of companies involved in thirteen commercial sectors. This represented a significant departure from previous legislation that only allowed international companies to do so in designated “free zones”.

Source: IMF (UAE GDP Growth YoY)

Abu Dhabi will therefore welcome the IMF’s findings. However, the uptick in predicted economic growth is as a result of increasing state expenditure to support Expo 2020, with the event accorded a AED 33 billion (USD 9 billion) budget, with AED 23 billion (USD 6.3 billion) targeted at urban housing and infrastructure development. It is this increased outlay that has caused the Fund’s improved prediction, rather than the Government’s wider reforms. Indeed, the figure masks significant underlying economic weaknesses, particularly forecasted declines in global oil and gas demand, which will limit growth, especially for Abu Dhabi which remains heavily reliant on oil exports. The economy is also being undermined by the ongoing US-China trade war, with Washington’s imposition of tariffs on Beijing causing the domestic steel and aluminum industry’s growth rate to collapse from 20.8% in 2017 to 1.8% in 2018. Separately, the US’s reimposition of nuclear-related sanctions on Tehran has undermined the UAE’s trade with Iran, a relationship that was worth around USD 19 billion in 2018, and was particularly important to Dubai

The Government will be aware of the fact that the economic boost predicted next year will be temporary, and will thus continue to seek increased international commercial agreements. Indeed, it will likely look to exploit international interest and increased foreign business travel to Expo 2020 as an opportunity to secure increased investment. Officials will also further efforts to attract foreign investment in line with IMF recommendations, such as increasing support for small-and-medium enterprises and implementing a more transparent fiscal framework. However, investors will remain cautious, given the UAE will continue to suffer the negative economic impacts of the US-China trade war, as well as persistent security concerns relating to the risk of attacks by Iran despite Abu Dhabi’s recent attempts to calm bilateral tensions. Moreover, the Government will scale back its expenditure following Expo 2020, as evidenced by Dubai’s decision in August to delay its al-Maktoum airport expansion plans from 2025 to 2030, which will limit efforts to expand trade and tourism, further restraining efforts to drive sustained increases in investment and growth.

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