United Arab Emirates Politics September 2018

United Arab Emirates

United Arab Emirates: Cabinet approves largest budget in history, which should boost growth in 2019

September 30, 2018

On 30 September, the UAE cabinet approved an AED 180 billion (USD 49 billion) three-year federal budget plan for the period 2019-21. At AED 60.3 billion (USD 16.4 billion), the 2019 budget is the largest in the history of the country, and represents a 17.3% increase over the 2018 budget. This move comes after the cabinet approved an AED 1.97 billion increase for the 2018 budget earlier in September, and underscores the government's shift to a more proactive stance to stimulate the economy amid higher oil prices.

Although the federal government's budget represents only a small fraction of all public spending in the UAE—most of which occurs at the emirate-level—higher spending at the federal level could be matched by individual emirates. According to Bilal Khan, Senior Economist at Standard Chartered: “The announcements are in line with our view that policymakers are likely to use counter-cyclical fiscal policy to support non-oil growth in the UAE over the next couple of years. The increased outlay in the federal budget is likely to be accompanied by a co-ordinated fiscal accommodation at the emirate level, in our view.”

Looking at the allocation of the 2019 budget, it focuses heavily on social spending, with 42.3% earmarked for social development and social benefits (slightly under 2018's 43.5%) and 17% allocated to education. An additional 7.3% of the budget is destined to healthcare. The total combined budget—which includes the budgets of ministries and autonomous federal entities—reaches AED 69.3 billion for 2019 (USD 18.9 billion), of which AED 9.8 billion (USD 2.7 billion) are dedicated to infrastructure.

FocusEconomics Consensus Forecast panelists project that the fiscal balance will reach 0.9% of GDP in 2019, and 0.3% in 2020.

Author:, Economist

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