3 factors support the growth of the UAE economy over the next two years

The UAE remains the region's main destination for FDI inflows, the IIF said.

The Institute revealed in a recent report yesterday that the banking sector in the country remained strong under good legislation and close monitoring by the authorities of the sector, pointing out that mergers in the banking sector increase the productivity and efficiency of the financial sector.

Growth of the economy

In a report released yesterday, the Institute of International Finance (IIF) said there are three factors that support the growth of the UAE economy over the next two years: interest rate cuts, the Abu Dhabi government's stimulus package, and spending on Expo 2020 Dubai projects.

The report forecast the country's real GDP growth to 2.1 percent this year, compared with 1.7 percent in 2018, and 1.9 percent growth in 2020.

The report also predicted that the gross domestic product, at constant prices, will reach $ 413 billion this year, $ 419 billion in 2020, and that non-oil GDP will grow by 1.9% this year, and 2.2% next year.

Foreign investment

The UAE remains the region's main destination for FDI inflows, the report said, noting that it attracted about $ 11 billion in 2018, equivalent to 2.9% of GDP.

The report attributed this to a business-friendly investment environment, a distinct infrastructure, a diversified economy compared to the rest of the region, and political stability in the country.

The report estimated the growth of government foreign assets abroad, which includes the official reserves and sovereign funds of the State to 903 billion dollars at the end of last year, equivalent to 197% of GDP, expected to increase to 219% this year, and 217.4% in 2020 .

the financial sector

The report pointed out that the banking sector in the country remained strong under good legislation and close monitoring by the authorities of the sector, and was able to withstand external shocks.

A further fall in interest rates could have a slight impact on banks' interest rate margins, he said. He added that the merger between the financial sector institutions in Abu Dhabi is in full swing, in light of the merger recently announced between banks: «Abu Dhabi Commercial», «National Union» and «Crescent», pointing out that such mergers increase the productivity and efficiency of the sector Financial.

The report called on banks to increase their financing to small and medium-sized companies, pointing out that 75% of these projects do not have access to loans from banks, and banks lending to these projects in the country amount to less than 5% of the total loan portfolio of the banking sector.