Economic growth in the UAE is expected to increase to at least 3 percent in the medium term on the back of Expo 2020, according to Bank of America Merrill Lynch’s GEMs Macro monthly report.
The bank's MENA economist Jean-Michel Saliba said UAE real GDP growth is set to fall to 0.9 percent in 2017, from 2.2 percent likely in 2016.
The headline figure masks a likely contraction in the oil sector due to the OPEC deal, but Saliba said he sees non-hydrocarbon real GDP growth picking up to 2.7 percent in 2017, from 2.3 percent in 2016.
The report said Dubai remains committed to fiscal prudence but deficits are likely to widen modestly.
"The Dubai government is likely to have recorded a small budget surplus in 2016. Still, we expect the fiscal balance to shift to modest deficits (1-2 percent of GDP) from 2017 onward as capex associated with the new airport, new metro lines and Expo 2020 come on line," noted Saliba.
He added that Abu Dhabi appears on track to record fiscal surpluses with oil prices at around $50 per barrel.
Over the next five years to 2022, Abu Dhabi authorities are planning to anchor spending at a flat level of AED250 billion and target increasing revenues through the passage of the introduction of VAT, crude oil production increases and a stabilisation in oil prices.
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