The UAE remained the main destination of FDI inflows at about $11 billion in 2017, accounting for 22 per cent of total foreign direct investment to the Middle East and North Africa region, the Institute of International Finance said.
The UAE's friendlier business environment, excellent infrastructure, relatively diversified economy, and political stability continue to position it as one the most preferred investment destinations in the world, economists at the IIF said.
Garbis Iradian, Chief Economist at the Washington-based IIF said the UAE has benefitted from a relatively diversified economy, excellent infrastructure, and political stability.
"Economic performance is likely to improve in 2018 with firming oil prices, an improvement in global trade, and the expected easing pace of fiscal adjustment," said Iradian.
IIF expects non-hydrocarbon real GDP growth to pick up from 2.0 per cent in 2017 to 2.7 per cent in 2018. "As a result, growth in credit to the private sector is likely to accelerate from 1.7 per cent in 2017 to four per cent in 2018," said Iradian.
He said the UAE Vision 2021 aimed at achieving competitive knowledge economy, and a target of five per cent of GDP has been set for 2021 up from three per cent in 2017. "The sizeable fiscal consolidation efforts of the past three years, with more emphasis recently on nonoil revenue measures (including the introduction of the VAT), should put the fiscal stance on a more sustainable footing over the medium term," said Iradian.
The IFF expects the fiscal consolidation in Abu Dhabi to ease this year, while Dubai's fiscal stance remains expansionary. The consolidated fiscal account (including investment income) of the UAE is expected to shift to a small surplus of 0.4 per cent of GDP as the partial recovery in oil prices and the additional non-hydrocarbon revenues will more than offset the modest increase in public spending, the institute noted.
The IIF expects a decrease in the UAE nonresident capital inflows from $40 billion in 2017 to $31 billion in 2018 due to less fiscal financing need. "However, we see a significant increase in corporate issuance in 2018 due mainly to the large refinancing need of loans and bonds that mature this year."
The IIF said it expects GCC resident capital outflows, including change in official reserves and errors and omissions, to increase from $136 billion in 2017 to $210 billion in 2018.
"The international market is still keen on GCC exposure. Low debt-to-GDP ratio and substantial financial buffers in Kuwait, the UAE, Qatar and Saudi Arabia, give confidence to investors to gain exposure," it said.
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