IMF Chief Hails UAE’s Non-oil Growth but Warns of Rising Global Risks

Rapid reforms have put much of the Arab world in a strong place to weather economic storms, despite "enormous uncertainty" in the global economy and a slew of geopolitical crises, the head of the International Monetary Fund has said.

Kristalina Georgieva said she was impressed that Arab governments had largely stuck to their guns on economic reform, cutting costly energy subsidies and embracing artificial intelligence.

She singled out the UAE for its burgeoning non-oil economy and growing leadership in AI. The IMF's managing director spoke at a meeting of finance ministers

and central bank chiefs at the Arab Fiscal Forum, a day before the main World Governments Summit, beginning Tuesday. "The world is undergoing profound shifts in geopolitics, in trade policy, in demographics. And these shifts are converging to create enormous uncertainty," she said. "Fortunately, and despite this uncertainty, the world economy is holding and global growth is performing better than we anticipated just about a year ago.

"But let's be clear, this global resilience is being tested and will be tested. And our common goal is to build strong policies and institutions and institutional foundations to sustain whatever comes our way."

'Proud of the Arab region'

She said the IMF was pleased to raise its global economic growth projections to 3.3 per cent this year and 3.2 per cent in 2027.

"We upgraded the United States, this part of the world [the Middle East], India, China, the eurozone," she added. "The exceptions, unfortunately, are countries that suffer the consequences of either years of poor management or even worse, conflict, wars."

Ms Georgieva said global average inflation was projected to fall to 3.8 per cent this year to 3.4 per cent in 2027, although that is driven by "softer demand, which is not great, and lower energy prices, which energy exporters must take into account".

But she said: "I'm very proud of the Arab region. We expect growth to rise to 3.7 per cent this year, oil exporters are benefitting from increased production. Oil importers are benefitting from lower prices – so there is a little bit of something for everyone.

"We see robust remittances and rebounding tourism are good for the region. Financial conditions have improved.

"Diversification of economies in the region is progressing. I cannot tell you how impressive it is to see the UAE, 80 per cent benefitting from non-oil economy performance. And that goes across many of the oil-exporting and energy-exporting countries.

"What we see also very impressive in this region is how the move towards artificial intelligence is being embraced. And I could say the UAE is now taking the lead."

Risks abound

Ms Georgieva warned there are risks to the Middle East and the global economy. "Not everything is rosy. Risks remain high – risks from factors outside of your control, from geopolitics, and risks, some of them in your control, large and rising debt in many countries, fiscal strains, especially when you are struggling with many factors demanding more public spending.

"And I would say from the bottom of my heart, the most troubling of all risks, conflicts, wars. If we can mitigate this risk, many other things would get better.

"When these things are happening, you rely first and foremost on yourself. Your sound policies, your strong institutions. This is your best protection against vulnerabilities. My message has been, and remains, get your own house in good order."

'Let private sector flourish'

Ms Georgieva further urged Middle East governments to allow the private sector to flourish. In much of the region, the state is the main actor when it comes to major development projects and the biggest companies are owned or linked to the government.

"Your protection comes from a dynamic and resilient private sector," she said. "When you look at the performance of the world economy today, we recognise that over the last couple of decades, almost everyone, the government, moved out of directing economic activity and running companies and let the private sector in.

"I will tell everybody in this room, if you still have the finger of government where it doesn't belong, pull it out. We know this is not easy, but it must be done."