The International
Monetary Fund said after annual consultations with UAE authorities that the
United Arab Emirates is set to post its first fiscal deficit since 2009 because
of lower oil revenues, but it can avoid any serious economic slowdown.The IMF
said that the UAE's consolidated fiscal balance is expected to swing to a
deficit of 2.3% of gross domestic product in 2015 from a 5.0% surplus last
year.Mr Zeine Zeidane, who led the IMF mission, told Reuters the deficit posed
no threat to the economy. He estimated that at today's oil prices, the UAE
could keep spending at current levels for at least 30-40 years, drawing on its
ample financial reserves. Brent crude is currently around USD 63 a barrel.But
he said UAE authorities were considering ways to consolidate spending as a
matter of prudence. The IMF predicts a 2.2% fiscal surplus next year.Mr Zeidane
said that "It would be a very gradual fiscal consolidation, with no
significant impact on economic growth."The IMF is urging the UAE to
consider slowing growth in current spending, expenditure in areas such as wages
and raw materials, while expanding its revenue base with new taxes.One option
would be to introduce a value-added tax, which Gulf nations have been
discussing. Mr Zeidane said that it would probably have to be adopted
region-wide to avoid smuggling and distortions to individual countries'
economies.
Source: Steel guru