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Lower oil prices are eroding long-standing fiscal and external surpluses, but the UAE has continued to benefit from its perceived safe haven status and large fiscal and external buffers that have helped limit negative spillovers from lower oil prices, sluggish global growth, and volatility in emerging market economies.
Nonoil growth remained robust at 4.8 percent in 2014, driven by construction, notably owing to capital spending in Abu Dhabi, and services underpinned by Dubai’s transportation and hospitality sectors. Real estate market prices have edged down since mid-2014. With past increases in rents only feeding gradually into consumer prices, inflation increased to 4.3 percent year-on-year in May 2015, also reflecting upward adjustments of electricity and water tariffs in Abu Dhabi. Credit to the private sector has picked up. GREs have continued to strengthen their finances.
The economic outlook is expected to moderate amid lower oil prices. Nonoil growth is projected to slow to 3.4 percent in 2015, before increasing to 4.6 percent by 2020, supported by the implementation of megaprojects and private investment in the run-up to Expo 2020. Growth in oil production will likely to moderate given the global supply glut. Annual inflation is projected to pick up to 3.8 percent in 2015. The overall fiscal balance this year is expected to turn negative for the first time since 2009 to record a deficit of 2.9 percent of GDP, but is expected to return to surpluses from 2016. The current account surplus is also projected to decline substantially, to 5 percent of GDP and will slowly increase with the projected gradual recovery in oil prices. Credit growth is expected to remain supportive of the activity.

Source: International Monetary Fund
Updated: August 2015