IMF expects UAE economy to grow by 4 per cent in 2024

The International Monetary Fund (IMF) expects the real gross domestic product (GDP) of the UAE to grow by 4 per cent in 2024. In a statement today, following the conclusion of a team of its experts’ visit to the UAE regarding the 2024 Article IV consultations, the IMF stated that economic growth in the UAE is broad-based, driven by strong activity in the tourism, construction, manufacturing, and financial services sectors.

The IMF also anticipated that the UAE’s fiscal and external surpluses would remain high, supported by relatively high oil prices.

According to the IMF, the overall government surplus is expected to be around 5 percent of the UAE’s GDP in 2024, while the current account surplus is estimated to be about 10 percent of GDP for the same year.

The IMF noted that banks in the UAE generally possess substantial capital and liquidity reserves.

Meanwhile, Italy’s huge budget deficit and debt along with delays in spending post-COVID EU funds could erode investor confidence, the International Monetary Fund warned on Monday.

In its annual Article IV report on the Italian economy, the IMF urged the government to reach a primary surplus - net of debt servicing costs - of around 3% of output to ensure a gradually declining debt-to-GDP ratio.

Italy plans to bring the deficit below the European Union’s 3% threshold in 2026 while the debt, the second largest in the euro zone as a proportion of output, will follow a rising trend towards 140% of GDP through 2026.

This year the government forecasts a primary deficit of 0.4% of GDP, narrowing from a primary deficit of 3.4% in 2023.

“Domestic factors could weaken growth, including an inability to complete the post-pandemic spending and effectively implement reforms, while still large fiscal deficits could erode investor confidence, further weakening public finances,” the IMF said.

Rome should also raise the effective retirement age to streamline its expensive pension bill.

Italian GDP is seen by the IMF rising by 0.7% in 2024 and 2025 as the expansionary effect stemming from the EU funds is expected to largely offset the phasing out of costly incentives for home renovations, the so-called Superbonus.

However, a “faster than planned fiscal adjustment is warranted to lower the debt ratio with high confidence and reduce financing risks.”

The Italian banking system remains sound according to the IMF, but stability risks could rise as monetary policy becomes less restrictive and the effects of exceptional support measures wane.

“The current increase in bank profits should be used to reinforce resilience to potential future shocks while funding should be adequately diversified,” the report said, adding any scheme allowing borrowers to buy back previously-sold non performing loans (NPLs) risks undermining the secondary market for bad loans.

Last year a growing number of lawmakers from both ruling and opposition parties backed proposals to amend bad-loan rules to help borrowers - both individuals and small- and medium-sized businesses - stoking uncertainty in the sector that buys up bad loans, which is already facing a dearth of activity.

Meanwhile, local stock markets attracted liquidity exceeding Dhs1.4 billion at the close of today’s trading, with International Holding Company (IHC) and Emaar Properties leading the trades.

According to market data, the liquidity was distributed as Dhs1.008 billion in the Abu Dhabi Securities Exchange (ADX) and Dhs405.4 million in the Dubai Financial Market (DFM), after trading 377 million shares through the execution of more than 26,100 transactions.

The market capitalisation of listed stocks reached Dhs3.48 trillion at the end of today’s session, distributed as Dhs2.79 trillion for stocks listed on the ADX and Dhs688.7 billion for stocks listed on the DFM.

US Stocks - Futures inch up with Fed minutes, Nvidia results on tap for the week. US stock index futures edged higher on Monday, with Nvidia’s quarterly results and the Federal Reserve’s policy meeting minutes due this week likely to test Wall Street’s record-breaking run, Reuters reported.

The three major indexes marked their fourth straight week of gains on Friday, as upbeat corporate earnings and softer-than-expected inflation data supported hopes for interest rate cuts this year.

The benchmark S&P 500 and the tech-heavy Nasdaq both touched all-time highs last week, with the blue-chip Dow closing above the 40,000 level on Friday.

Deutsche Bank raised its year-end S&P 500 target to 5,500 from 5,100 points earlier, the highest among major brokerages, citing strength in corporate earnings.

Investors are keenly awaiting quarterly results from artificial intelligence (AI) chip leader Nvidia and minutes of the Fed’s latest monetary policy meeting, both scheduled for Wednesday.

Nvidia shares rose 1.3 percent premarket, with at least three brokerages raising the stock’s price target.

“The minutes will sound more hawkish on the margin than Chair Powell’s press conference, as other members on the committee were more concerned than Powell about whether policy was doing enough,” analysts at Bank of America said in a note.

Agencies