The UAE is poised to record an accelerated growth in 2018 to 3.6 per cent from 1.7 per cent in 2017, and it will further gain pace in 2019 to post 3.6 per cent growth.

After outpacing the rest of the GCC in economic growth in 2017, the UAE is set to almost double its expansion rate in 2018, the latest report by a panel of economists reveals.

The joint report by the Institute of Chartered Accountants in England and Wales (ICAEW) and Oxford Economics says that the UAE will record an accelerated growth in 2018 to 3.6 per cent from 1.7 per cent in 2017. The momentum will further gain pace in 2019 to post 3.6 per cent growth.

The report echoes the GDP growth projected by the International Monetary Fund, which said recently the UAE economy is on track to bounce back to register a growth of 3.4 per cent in 2018 while the overall GCC growth is poised to rebound to 2.2 per cent.

Sultan bin Saeed Al Mansouri, UAE Minister of Economy, said recently that the outlook for the economy is brightening despite regional and global macroeconomic challenges.

"With two years into Expo 2020 Dubai, the economic growth momentum is expected to pick up on the back of a vibrant non-oil sector as the country remains on track to establish a diverse knowledge- and innovation-driven economy," Al Mansouri said.

The ICAEW report says that several economies in the Middle East, particularly those in the GCC, are transitioning towards a "new normal" in 2018, allowing spending to start gradually recovering. Overall, GCC GDP is expected to grow from just 0.3 per cent in 2017 to 2.8 per cent next year, and acceleration from 1.4 per cent in 2017 to 3.2 per cent next year in the wider Middle East.

However, the accountancy and finance body says several risks remain to growth in the region, including those from politics and security.

The report, 'Economic Insight: Middle East Q4 2017', says public finances now look to be on a more sustainable path in most economies in the GCC thanks to three main factors: the upcoming value added tax, the important social change in Saudi Arabia with the lifting of the ban on women driving and as a result of a period of emergency austerity which saw public spending cut by almost 20 per cent from 2015-2017 at the GCC level.

The report observes that with Opec-plus oil production cuts likely to be maintained through 2018, and reversed in 2019, GDP growth is expected to pick up to around four per cent in both the GCC and wider Middle East in 2019.

"Within this, GCC oil GDP is forecast to rebound from a 2.3 per cent contraction in 2017 to growth of 1.7 per cent in 2018 and around one percentage point stronger in 2019. Growth in the GCC non-oil sector is forecast to pick up from 2.4 per cent in 2017 to 3.7 per cent in 2018 and 4.7 per cent the year after.

Tom Rogers, ICAEW economic advisor and associate director of Oxford Economics, said: "Economic growth prospects of the Middle East countries, particularly the GCC, are projected to improve in 2018 and the years after. But the political and security risks remain high and could limit or delay the recovery in the region."

Saudi Arabia is on the right track 2018 will be a key year of transition for Saudi Arabia in several contexts. For the first time, Saudi citizens will pay VAT on the goods and services they buy, Saudi women will be permitted to drive, and private (and foreign) investors may be able to take a stake in Saudi Aramco. The Kingdom is at the start of a potentially decades-long process of economic diversification and social change.

Michael Armstrong, FCA and ICAEW regional director for the Middle East, Africa and South Asia, said Saudi Arabia is moving in the right direction with regards to economic reforms. There is clearly increasing momentum behind the shift towards a more market-driven economy in Saudi Arabia. But this shift will take some time and for the coming years the economy will remain heavily influenced by traditional growth drivers - the oil sector and the importance of government spending.

The Saudi Arabia economy is expected to pick up from a 0.3 per cent contraction in 2017 - largely a result of lower oil output - to record growth of 2.3 per cent in 2018. As oil output is restored to pre-cut levels in 2019, GDP is expected to grow 3.8 per cent. But in the absence of more ambitious reform efforts in the coming couple of years, this is likely to be the speed limit for growth.

In its Regional Economic Outlook, the IMF projected GCC economic growth at just 0.5 per cent this year, the lowest since the 0.3 per cent growth recorded in 2009 in the wake of the global financial crisis.

"Preparing their economies to the post-oil era is something that is becoming a priority for authorities all over the GCC and it is the right time for them to accelerate their diversification outside oil and to promote a greater role for the private sector to lead growth and create additional jobs," said Jihad Azour, director of the Middle East and Central Asia at the IMF.

"Oil exporters should continue pursuing deficit-reduction plans to maintain fiscal sustainability, and where relevant, to support exchange rate pegs," the IMF said.

The Washington-based fund has projected a 1.3 per cent growth in UAE's real GDP in 2017, which it expects to surge to 3.4 per cent in 2018. While consumer price inflation in the UAE will edge up slightly from 2.1 per cent in 2017 to 2.9 per cent in 2018, the UAE will record current account balance at 2.1 per cent this year and next, the IMF said.

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