Abu Dhabi – Mubasher: The UAE’s fiscal surplus is expected to grow to 3.2% of gross domestic product (GDP) in 2018 due to the recovery of oil prices, according to Fitch Solutions.
The global agency added that it had raised its forecast for the UAE's fiscal surplus during 2019 to 3.8% of GDP from 3.5%.
The UAE's public spending is also projected to rise, given the government’s new programmes which aim to stimulate the national economy.
The growing expenditures may affect the higher oil revenues expected after members and non-members of the Organization of Petroleum Exporting Counties (OPEC) agreed to up output in June, Fitch Solutions said.
OPEC members are also set to meet in September to discuss a mechanism for controlling production as well as the impact and possible hike in output after the US imposes sanctions on Iran.
“While we expect sustained fiscal surpluses over the coming decade, we note that structurally stagnating oil revenue implies a need for the government to maintain momentum on reforms aiming to increase non-oil revenue,” Fitch Solutions added in its report.
It added that the UAE's non-oil revenue was expected to grow in the coming period on the back of the introduction of a 5% value-added tax (VAT).
"We do not expect further big-ticket tax increases over the coming quarters, however, as higher oil prices reduce the urgency to raise more revenue, while policymakers will see to maintain an attractive fiscal backdrop, and therefore support the country’s competitive business environment,” the research agency concluded.
