UAE consumer prices drop by 1.5% in 2019

The International Monetary Fund (IMF) expects consumer prices in the UAE to fall 1.5% this year, meaning a fall in commodity prices measured by the consumer price index (inflation).

The IMF said in a report released yesterday that the UAE is one of the countries that allow to make the most of capital flows, through initiatives to stimulate foreign direct investment, while predicting the growth of non-oil GDP of the Gulf states during the next year, supported by Expo 2020 Dubai.

Expo 2020 Dubai

The non-oil GDP of the Gulf Cooperation Council (GCC) is expected to grow by 2.8% next year, compared to 2.4% this year, boosted by infrastructure spending, especially in the UAE. Expo 2020 Dubai will be organized and the GDP of the Gulf countries is expected to reach 2.5% in 2020, compared to 0.7% this year.

Capital flows

The UAE is one of the countries that make the most of capital flows through initiatives to stimulate foreign direct investment (FDI), the IMF said in its MENA Regional Economic Prospects report, launched at a press conference in the DIFC yesterday. It can enhance productivity through the transfer of new technology and contribute to job creation.

He added that removing restrictions on investment and increasing protection and opportunities for investors are essential factors to achieve this goal, pointing out in this regard to allow the state to be 100% foreign ownership in a wide range of economic sectors.

Falling prices

The IMF report maintained its forecast for the UAE's economic growth at 2.5% next year and 1.6% this year, pointing out that these figures are currently under review within the framework of Article IV consultations conducted by the Fund with concerned state officials.

The report expected consumer prices to fall by 1.5% this year, which means a decline in the prices of goods measured by the consumer price index «inflation», while the inflation rate is expected to reach 1.2% next year.

The IMF estimates that the country's GDP at current prices will reach $ 414 billion (more than 1.5 trillion dirhams) next year, compared to about $ 405.8 billion (about 1.48 trillion dirhams) this year.

GDP growth

The report also predicted that the country's non-oil GDP will grow by 3% next year compared to 1.6% this year, while oil GDP is expected to grow by 1.4% in 2020, compared to 1.5% in 2019.

The report showed that the rate of oil production in the country will reach 3.1 million barrels per day and 3.17 million barrels next year. He expected the country's total oil exports to reach 2.25 million barrels per day this year and 2.31 million barrels per day in 2020.

The report estimated that the price of oil equivalent in the state budget during the current and next two years to 70 dollars per barrel.

He also expected the country's total exports of goods and services this year to reach $ 400.1 billion (about 1.46 trillion dirhams) and $ 415.1 billion (about 1.52 trillion dirhams) next year. $ 1 billion (about AED 1.17 trillion) this year, and $ 342.1 billion (about AED 1.25 trillion) next year.

Supporting factors

Jihad Azour, Director of the IMF's Middle East and Central Asia Division, attributed the Fund's expectations of improving the performance of the non-oil sector in the UAE to several supporting factors, notably the diversification of the economy and the opening of markets, in addition to the implementation of a number of positive government initiatives for the recovery of the economy. By reducing the cost of business, improving the ranking in the field of ease of doing business.

"Value Added"

Azour said that the VAT has achieved its objectives since its implementation, as it has worked to diversify the sources of income and reduce the budget deficit in the countries that have applied, including the UAE.

He added that the tax did not have a negative impact on the increase in inflation rates or the decline of the activity of small and medium-sized companies, pointing out that the fund did not monitor the negative inflation significantly in the first year of the application of the tax early last year, which means that the impact of the tax was limited on business activity.

Azour explained that VAT serves the economy in the medium and long term, as well as its contribution to understanding the performance of economic sectors, which is important in addition to its contribution to increase government revenues that can be used for development.

On the possibility of some countries to increase the tax rate on the current rate of 5%, Azour said that «each country has its own, and such a decision is a matter for the state itself».

«OPEC Plus»

Jihad Azour, director of the IMF's Middle East and Central Asia Division, said yesterday that the IMF's Regional Economic Prospects report indicated that it was uncertain whether the current OPEC Plus agreement would expire in March. The agreement will be extended.

He added that «it is difficult at the moment to predict specific oil prices, especially since the (OPEC Plus) deal to reduce production and not control the pricing, which is governed by several factors».

- UAE allows investigation

Maximum benefit

Of header flows

Money across initiatives

Investment activation

Foreign Direct.

1.46

Total trillion dirhams

State exports

Of goods and services

In 2019.