| Description |
1 online resource (52 pages) : color illustrations |
| Series |
IMF country report ; no. 16/266 |
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IMF country report ; no. 16/266.
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| Contents |
Performance and risks posed by government related entities in the UAE -- Financial stability of the banking system amid lower oil prices and higher short-term interest rates -- Competitiveness and diversification in the context of fiscal consolidation |
| Summary |
Government-related entities (GREs) continue to be a major source for growth and development for the UAE, but they also pose significant fiscal and financial risks as GRE's debt remains high, though declining and actively managed. Across a sample of 53 companies with government ownership and publicly available information, panel regression estimates suggest that leverage depends mainly on firm characteristics but also on macroeconomic variables like government gross debt to GDP and global financial conditions which makes GREs vulnerable to external shocks in the current uncertain environment. To mitigate GREs risks, the authorities should build on recent progress and develop an integrated approach, including implementing prudent fiscal policies, enhancing macro and micro-prudential frameworks, controlling GREs borrowing and integrating them to the public debt management framework, and further strengthening corporate governance and transparency. -- |
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The UAE banking system has weathered well so far the recent period of lower oil prices. The UAE banking system remains well capitalized, liquid, profitable, with high asset quality. However, sustained lower oil prices and higher short-term interest rates pose challenges. Asset quality could deteriorate in tandem with lower economic activity if lower oil prices are offset by cuts in expenditures with a high fiscal multiplier. In addition, liquidity could come under further pressure if the government continues to withdraw its banking deposits to finance the deficit. Banks have reacted to lower government deposits by attracting nonresident deposits and increasing wholesale funding to sustain robust private sector credit growth without raising lending rates on average. However, these sources of wholesale funding are more costly2 and this, together with lower asset quality,3 can affect the profitability and capital buffers of banks. If there are further reductions in government deposits and increases in US policy rates, banks will need to manage a combination of liquidity pressures, higher funding rates, and lower profitability. -- |
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The UAE's impressive transformation has been initiated by its founder's vision, the late Sheikh Zayed, who believed that "oil is of no use unless it is used in the service of the people". As a result, early on oil revenues financed fiscal and quasi fiscal spending to develop infrastructure to retool the growth model for a more diversified economy, transforming a confederation of states with primarily rural and trading economic activities into an emerging regional economic hub. Its authorities have ambitious goals for further economic diversification and to transition to a knowledge driven economy to position the country so that it can celebrate its last barrel of exported oil. Other countries' experience suggests that the road to economic diversification is long and challenging, but can be successfully managed by promoting private sector-led and export-oriented growth. Today UAE's challenges are to transition into a knowledge driven economy and gradually move from a state dominated model to one that is more private sector focused |
| Notes |
"August 2016." |
|
"July 5, 2016; prepared by Pilar Garcia Martinez, Andre Santos, Aminata Toure, and Juan Carlos Flores"--Page 2 of pdf |
| Bibliography |
Includes bibliographical references |
| Notes |
Description based on online resource; title from pdf title page (IMF.org website, viewed September 21, 2016) |
| Subject |
Government business enterprises -- United Arab Emirates
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Debts, Public -- United Arab Emirates
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Banks and banking -- United Arab Emirates
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Petroleum products -- Prices -- United Arab Emirates
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Fiscal policy -- United Arab Emirates
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Diversification in industry -- United Arab Emirates
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Competition -- United Arab Emirates
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Banks and banking
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Competition
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Debts, Public
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Diversification in industry
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Fiscal policy
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Government business enterprises
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Petroleum products -- Prices
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United Arab Emirates
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| Form |
Electronic book
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| Author |
Santos, André, author, (IMF staff)
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Touré, Aminata, author, (IMF staff)
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Flores, Juan Carlos, (Information manager), author, (IMF staff)
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International Monetary Fund, publisher.
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| ISBN |
9781475522075 |
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147552207X |
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