UAE - The UAE's budget deficit will narrow in 2018 as compared to last year while next year will see a balanced budget, says a new research.
"Overall, we expect an increase of around three per cent year-on-year in consolidated government spending, even as the deficit continues to narrow on higher oil and non-oil revenues. We estimate a consolidated budget deficit of 1.5 per cent of GDP in 2018, down from an estimated 2.7 per cent in 2017," Khatija Haque, head of Mena Research, Emirates NBD, said in the report.
The study forecast revenues totalling $113 billion (Dh41 4.7 billion) as against $119 billion (Dh436.7 billion) expenditures.
It predicted that the budget expenditure would grow by nearly $2.86 this year to $118.6 billion (Dh435.26 billion) as compared to $115.3 billion last year.
"Based on our estimates, the UAE's break even oil price in 2018 will be the lowest in the region at $63 per barrel, and we expect the UAE to post a balanced budget in 2019," Haque said in the report.
Dubai recently announced 47 per cent hike in allocation for infrastructure in 2018 budget ahead of Expo 2020. The report, overall, sees increase in spending on the infrastructure in the UAE for 2018. In the GCC, following two years of relative austerity in terms of regional budgets, which saw the introduction of new taxes, cuts to energy and other subsidies, and slower public sector wage growth, governments in the region have signalled a more expansionary fiscal stance for 2018.
Overall, the study predicted that GCC budget spending to expand from $521.1 billion in 2017 to $564.3 billion this year.
Emirates NBD Research sees $87 billion total GCC budget deficit for 2018 with revenues totaling $457 billion while expenditures reaching $544 billion.
Saudi Arabia, Kuwait, Oman and Bahrain will record a budget deficit of $52 billion, $10 billion, $8 billion and Bahrain $3 billion.
Saudi Arabia announced a 5.6 per cent increase in its budget for 2018. Emirates NBD research estimated official budget spending at over SAR 1 trillion this year. The fiscal deficit would rise to 13.7 per cent of GDP from nine per cent in 2017.
Looking at the projected budget deficits, we expect all GCC sovereigns to tap capital markets this years. With circa $31 billion of fixed and floating rate USD bonds maturing this year, we expect total new issuance in 2018 to be in line with recent years," said Anita Yadav, head of Fixed Income Research.
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