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GRADUAL ECONOMIC ADJUSTMENT Paper

Words: 688, Paragraphs: 21, Pages: 3

Paper type: Essay , Subject: Economics

Categories: Economics, Gdp

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GRADUAL ECONOMIC ADJUSTMENT

Firstly, the country’s large financial buffer, safe- haven status, diversified economy, and the authorities’ robust policy responses are facilitating the adjustments while safeguarding the economy and the financial system. Authorities have also reformed energy subsidies, improving the business environment, despite the UAE’s highly global ranking. It also strengthens policy frameworks in financial, fiscal, statistical area. The outlook of oil prices remains unchanged.

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Secondly, Together with lower oil prices and lower oil production growth, growth has declined due to the postponement of some public infrastructure projects and a slowdown in global trade. High interest rates, stronger exchange rate, and subdued stock and property prices. Financial markets have not been significantly affected by diplomatic rift with Qatar

Thirdly, the nonoil deficit is estimated to have declined by 6 percentage points to 21.8 percent of no oil GDP in 2016, following the decline of 9.7 percentage points. The deficit was financed mainly through withdrawals from the sovereign wealth funds and external borrowing.

In addition, Total governments and GRE debt declined by 5 percent of GDP, including Abu Dhabi’s Eurobond issue ($5billion in May 2016) and Sharjah’s sukuk issue ($ 500 billion in January 2016). Dubai’s GRE debt decreased by 60 percent of Dubai’s GDP

Further, No oil exports remains stable, Current account surplus declines when the lower oil export and still strong import. Banks’ assets increase, thus gross international reserves declined to $ 85.4 billion

More, shrinking interest margins and rising impairment charges reduced profitability and triggered cost cutting. The NPL ratio has stopped declining since 2015. Banks remained adequately capitalized and outstanding loans are concentrated in the private sector. Although deposit growth strengthened, banks continued to access wholesale funding

No oil growth is projected to rise to 3.3 percent in 2017, reflecting increased domestic public investment and a pickup in global trade. Market analysts suggest that the real estate market is close to balance but is facing difficulties in rising supply. Inflation will rise to 2.2 percent this year, partly reflecting utility and gasoline price adjustments, and higher imported inflations. The current account surplus is expected to improve to 2.6 percent of GDP this year mainly owing to rising n oil exports. Rising infrastructure investment, including preparations for Expo 2020

Despite the improving outlook, risks are skewed to downside and largely reflect the uncertainties surrounding oil prices, policies in major economies, and financial market conditions. Lower oil prices decline could weaken trade, tourism, and asset and asset price. Retreat from cross- border global shift in policies. Tighter and more volatile financial condition

Under current policies, the budget is projected to return to balance by 2020. The gap between current nonoil primary deficits, the federal budget is projected to be balanced

The authorities intend to underpin fiscal consolidation with a combination of spending restraint, improvements in efficiency, and increase in nonoil revenues. Stepped-up spending reviews supported by appropriate budget controls would increase the efficiency of spending and contains its growth. Revenue needs timely introduction of VAT and excise taxes

The underlying goal is to adapt to the new oil market realities. The states relies on oil revenues to provide generalized benefits and employment has been challenged

A more comprehensive and transparent fiscal policy framework is facilitate decision-making and foster credibility, deals with strengthening budget management, building fiscal frameworks, enhancing coordination between government and GRE’s, improving cash management remain a priority, particularly in an environment of fiscal consolidations

The CBC is considering consolidation its operational framework with a view to keeping money market rates in line with those implied by peg while introducing market determined

The peg is supported by comfortable external financial buffers

Banks remain sound and liquid with stable and fully provisioned NPLs . However, loans to related parties concentration risks remains high in some cases.

Staffs welcome the CBU’s introduction of the Basel iii capital adequacy standards in March 2017. Authorities did not expect banks to need additional capital

Given the openness of the economy, the steady increase of nonresident deposit, and UAE’s geographic focus on measure to mitigate risk

The CBU initiated corrective measures to improve the compliance of the affected institutions to AML/CFT requirements to prevent disruption of those sectors to the informal sector.

About the author

This sample is done by Scarlett with a major in Economics at Northwestern University. All the content of this paper reflects her knowledge and her perspective on GRADUAL ECONOMIC ADJUSTMENT and should not be considered as the only possible point of view or way of presenting the arguments.

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