MOF reviews UAE's major economic achievements in Article IV consultations with the IMF

The meeting was in line with those conducted by the IMF annually with its Member States to collect data and review their economic development. Based on these Article IV consultations, the IMF prepares an assessment report and makes recommendations about macroeconomic indicators. The delegation praised the economic development of UAE during 2008 and 2009 and confirmed that its prudent fiscal and monetary policy has enabled it to overcome the effects of the global financial crisis.

Noteworthy initiatives of UAE include establishing a ministerial committee, chaired by HE Obaid Humaid Al Tayer, Minister of State for Finance, to address the impact of the global financial crisis and prepare a stimulus package. The committee which includes HE Sultan Bin Saeed Al Mansouri, Minister of Economy and HE Sultan bin Nasser Al Suwaidi, Governor of the Central Bank, continues to observe macroeconomic developments and recommends necessary measures.

The Ministry established the Coordinating Council for Financial Policy, headed by HE Younis Haji Al Khouri, MOF's Director General. It includes financial department representatives from local governments and collects data and generates financial reports at the state level in addition to preparing financial policies and budget recommendations. It drafts key aspects of governmental spending, with a view to support economic development and aids decision-making and planning to support sustainable development in the state.

The Ministry also established a department for the coordination of fiscal policy that coordinates to conduct economic research and consolidate financial statements about UAE's federal and local government income and expenditure. This department researches fiscal policy consolidation for the medium-term macroeconomic framework of UAE and is tasked with preparing its medium-term budget for the period 2011 - 2013. Zero-based budgeting and creating a public debt management office for the implementation of debt management strategies and risk are other key tasks of the department.

The IMF delegation commended the Ministry and said that its achievements in fiscal policy have played a vital role in supporting and strengthening UAE's macroeconomic performance in the past. The Ministry's initiatives have demonstrated the strong desire of the Federal Government to maintain the gains achieved and to take advantage of opportunities that have emerged internationally, including attracting global capital.

The Ministry's major achievements are summarized as follows:

• UAE's reaction to the global financial crisis was comprehensive and rapid. The government made an allocation of Dhs70bn to boost liquidity in the banking sector in addition to establishing Dubai Support Fund, which offered financial support to companies operating in Dubai. This lead to the stability of Dubai's economy as shown by the advancement of strategic infrastructure projects such as Dubai Metro and Jebel Ali Airport project. It also allows Dubai to continue promoting itself as a tourist destination.
• Global liquidity has begun to move back to UAE through the financial markets as well as deposits from the Arabian Peninsula and Switzerland. The interest rate on deposits has increased in the State, an important reason for attracting foreign deposits as well as an indicator of the stability of UAE's economy. High rate of returns on bonds issued by some emirates have led to attracting global capital. The fact that UAE can attract global liquidity into its open economy is made possible partly by the work of the Ministry.
• Measures taken by the Ministry to coordinate fiscal policy between federal and local governments play a major role in managing expenditures, strengthening various financial departments and maintaining sustainable growth and macroeconomic stability.

Key economic indicators from the IMF delegation reflect the macroeconomic strength of UAE. The most important indicators are:

• The IMF delegation reported that UAE's macroeconomic indicators were positive, reflecting the strength of its economic recovery and its ability to overcome the consequences of the global financial crisis.
• The IMF expects UAE's GDP to grow by 3% in 2010 and by 4.3% in 2011. It also predicted that growth will continue and be 5% in 2012. Growth of the non-oil sector growth will be 1% in 2009, 3% in 2010 and 4% in 2011.
• The delegation expected that inflation in 2009 will shrink to 1% of GDP from 12.2% in 2008. It will then increase to 3% in 2010 and to 4% in 2011 and 2012. The reason of this rise will be the growth in economic activity in UAE. Falling housing rents have played a major role in the decline of inflation this year.
• It expects growth in UAE's public expenditure to be 14% in 2009 as compared to 2008.
• It confirmed that the gross domestic investment rate will reach 28.7% of GDP in 2009 compared to 22.5% in 2008. This growth is attributable to improvement in investor confidence and investment climate. It forecast that total domestic investment will remain almost the same in 2010 and 2011 and will rise again in 2012 to reach 29.6%.
• The delegation expects UAE's exports to rise to $165.5bn in 2009 and confirmed their rise in 2010 to $188.2bn, $207.2bn in 2011 and $221.9bn in 2012.
• It is expected that UAE's current account will shrink in 2009 to reach -5.3% due to decline in oil exports, and will rise again in 2010 by 4.1%.
• The delegation predicts that broad money supply (M2) will reach Dhs731.6bn in 2009, compared to Dhs674.3bn in 2008. It will continue its rise in 2010 to reach Dhs825bn.

Commenting on the positive recommendations and forecasts from the IMF, HE Obaid Humaid Al Tayer said, "UAE's achievements in 2008 and 2009 and the application of a prudent fiscal policy ensure the durability of our economy and our ability to achieve sustainable growth."