Country Forecast United Arab Emirates July 2018 Updater

Country Forecast United Arab Emirates July 2018 Updater

  • July 2018 •
  • Report ID: 5016162 •
  • Format: PDF


  • There will be little threat to domestic political stability in the UAE during the forecast period, although regional tensions will remain elevated and a source of concern. Power will remain concentrated within the ruling families, who will resolve disputes internally and ensure that any succession passes smoothly. The authorities will clamp down on perceived challenges to the political status quo or criticism of their allies, especially from Islamist quarters.
  • Popular demand for democracy will remain minimal as generous benefits and job opportunities are maintained for nationals, despite consumers feeling the impact of the introduction of value-added tax (VAT) and excise duties. The wealth gap between Abu Dhabi and Dubai and the northern emirates is a fault line, but the authorities are increasing social support for the northern emirates.
  • Regional relations with Iran will remain tense following the US withdrawal from the Iran nuclear accord. The UAE will maintain its assertive external policy, especially towards Islamist groups in Syria and Yemen. The UAE, along with three other Arab countries, will continue to boycott Qatar, which the "quartet" accuses of supporting Islamists and being too close to Iran.
  • The further pick-up in oil prices suggests new revenue-raising measures will be put on hold and that spending aimed at boosting the welfare of nationals and at encouraging economic diversification will be prioritised. Government spending-especially capital expenditure-will rise strongly. The Economist Intelligence Unit forecasts that the fiscal account will move into surplus in 2018, averaging 0.7% of GDP in 2018-22 (dipping into deficit in 2020).
  • The government will continue to attract foreign investment by providing a broadly attractive business environment, with tax rates that are still low, improved regulation and oversight (particularly in free zones), liberalising investment and hiring for foreigners, few trade or exchange controls, solid infrastructure, world-class logistics and a positive attitude to the private-sector.
  • We forecast that real GDP growth will pick up to an average of 3.7% a year in 2018-22 as oil production rises and non-oil activity is supported by investments in infrastructure, although this level of growth is still unspectacular for the UAE. We forecast that inflation will spike with the introduction of VAT in 2018 but will remain manageable throughout the forecast period.
  • The current-account surplus will average 8.1% of GDP in 2018-22, as oil prices strengthen; Brent crude will average around US$73.3/barrel. Oil export volumes (from 2019), non-oil and services exports, and imports will all rise.


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