"The combined federal and emirate budgets imply further fiscal consolidation this year. Continued fiscal consolidation is appropriate as it would undo earlier fiscal stimulus that is no longer needed amid a strengthening economic cycle and recovering private credit growth," said the IMF statement.
A gradual reduction in fiscal spending is expected to help reduce fiscal vulnerabilities (indicated by an increased break-even oil price). The IMF views the federal budget as balanced and
As budget amendments in
The IMF mission to the
The IMF recommended gradual reduction in energy and water subsidies and limiting of further increases in the wage bill to maintain flexibility in the budget and gradually making private sector employment more attractive for nationals.
While the exchange rate peg has served the
The Article IV statement said the macroeconomic outlook of the
By contrast, growth in hydrocarbon production will likely be limited in the context of an amply supplied global oil market. Inflation is expected to further increase, driven by higher rents. The current account is set to further decrease reflecting a projected moderate decline in hydrocarbon prices and continued import growth.
The IMF sees significant external downside risks decline in oil prices, which could be triggered by deceleration of global demand or coming-on-stream of excess global supply capacity. The
Renewed surges in global financial market volatility could trigger an increase in risk premiums and tighten liquidity conditions for the
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