The first economic deficit in the United Arab Emirates since the year 2009, which was due to decreased oil revenues, is expected to be posted. However, things don’t all need to go downhill, as a serious financial slowdown can be avoided, according to the ‘International Monetary Fund’, after the yearly meetings with the UAE authorities.
The full economic balance for the UAE is expected to hit a deficit of 2.3 percent of gross local merchandise in 2015 from a 5 percent excess the previous year, the IMF is reported to have stated on Thursday.
Zeine Zeidane, leader of the IMF mission, mentioned to Reuters that the deficit was not a danger or threat to the economy. He expected that in the context of the present oil prices, the United Arab Emirates might be able to keep spending at its current levels for another three to four decades, sighting its already sufficient economic revenues in the current market. Brent oil is approximately $63 per barrel.
UAE is considering means to merge spending habits as a matter of caution. The IMF expects a 2.2 percent financial surplus in the upcoming year.
Zeidane mentioned that this surplus will be a gradual one and will not have any significant economic impact on the overall growth.
The UAE is being encouraged to try to slow down on present spending habits, focusing particularly on raw materials and wages while increasing its revenue with improvised taxes.
One possibility being considered, is applying value-added-tax (VAT), which has been on the discussion table for a while in the Gulf. According to Mr. Zeidane, this will have to be adopted in the whole region in order to avoid distortions and smuggling on specific economics. He further added that the Fund suggested to the UAE authorities to consider introducing obliterate taxes and a constant corporate charge of tax for foreign and local companies. At the moment, there are hardly any corporate taxes in the oil sector, other than the 20 percent charge on foreign banks within Dubai.
A corporate tax in the UAE could be set at a lesser rate in order to get the government to implement a proper, running countrywide tax scheme. Mr. Zeidane refused to state just how much of this tax the government was willing to impose.
The IMF estimates that the GDP growth will go down by 3 percent this year, which is down from the 4.6 percent of last year, but it will go back up 3.1 percent in the upcoming year.