The UAE’s economic recovery is solid and backed by tourism, hospitality and rebounding real estate sectors, IMF said in a note on Thursday.
“While growth in oil production moderated, public projects in Abu Dhabi and buoyant growth in Dubai’s service sectors continued to underpin growth, which reached 5.2 per cent in 2013. The real estate sector has been recovering quickly in some segments, especially in the Dubai residential market. As a result, headline inflation started to increase moderately. The current account and fiscal surpluses continue to be sizable owing to high hydrocarbon prices,” it said.
IMF said macroeconomic outlook is also positive.
“Economic growth is expected at 4.8 percent in 2014 and about 4.5 percent in coming years, supported by a number of megaprojects announced over the past 18 months and the successful bid for the World Expo 2020. Inflation is projected to further increase, driven by higher rents. The strengthening real estate cycle, particularly in the Dubai residential market, could attract increased speculative demand, creating the risk of unsustainable price dynamics and an eventual, potentially disruptive correction,” IMF said in a note on Thursday.
It said there would be a need for further policy action if real estate prices continue to increase rapidly.
It, however, welcomed the recent introduction of targeted macro-prudential measures and the increase in Dubai’s real estate registration fee, and encouraged additional fees for reselling properties within a relatively short time to discourage speculative demand. Directors felt that these measures could be complemented by further tightening the recently introduced macro-prudential policies if real estate lending increased more strongly.
IMF also welcomed the recent progress in restructuring the debt of Dubai’s government-related entities (GREs), and stressed the need for continued strengthening of the GRE sector.
Originally published on www.247.com