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The United Arab Emirates’ fiscal machine has adapted to the status quo of global oil markets, according to a new report by the International Monetary Fund (IMF) on Monday.
The Gulf country is “adjusting well to the new oil market realities,” the IMF sad, adding that it expects the nation’s economic growth to “rebound” in 2017 due to its “large financial buffers, diversified economy, and the authorities’ robust policy responses [which] are facilitating adjustments while safeguarding the economy and the financial system.”
Non-oil growth will reach a 3.3 percent growth rate this year, the IMF estimates, “reflecting more gradual fiscal consolidation, stronger global trade, and higher Expo 2020 investment.”
Still, the oil GDP will decline by 2.9 percent due to oil production cuts promised to the Organization of Petroleum Exporting Countries (OPEC) in November. Most members of the bloc, excluding Nigeria and Libya, agreed to lower production in order to allow global oil prices a chance to recover from a supply glut. In March,, the country cut daily crude oil production by nearly 200,000 barrels, partly due to refinery maintenance.
Over the next two months, the UAE will cut another 278,000 bpd, demonstrating its compliance with its quota under the agreement. Abu Dhabi National Oil Company informed its clients yesterday that it will be selling less crude in May. The company said it will be reducing the shipments of the two local grades, Murban and Das, by 7 percent.
“With the prospects of firmer oil prices, the government’s budget deficit is projected to decline to 4.5 percent of GDP and the current account surplus to improve to 2.4 percent of GDP in 2017,” the IMF report said. “Existing financial buffers allow fiscal consolidation to proceed gradually. Reaching the goal of returning gradually to a balanced budget over the medium term would save resources for future resources.”
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…