It has been said by Senior Citi executives that The UAE is making serious attempts to reform its economy and public finances to adjust to new reality of lower oil prices. The country has a head start in reform in terms of economic diversification as well as a larger role for private sector in the economy.
“There have been efforts at consolidation, be it in the financial sector, in the public sector or the oil sector. This is all in the agenda of driving efficiency and dealing with the new lower levels of commodity prices” said Elissar Farah Antonios (Citi CEO, UAE).
The UAE is known to be one of the most diversified economy within the GCC and as a result, in the past two years it has been the least vulnerable to the low oil price environment and among the emirates, Abu Dhabi been on the lead of fiscal and other economic reforms.
So far, an adjustment plan is that the government cut down on spending plans (mainly in the project space). Similarly, authorities are on board on a process of rationalisation in the public sector. They have announced a plan to merge two of the largest domestic state-controlled banks (The First Gulf Bank and The National Ban of Abu Dhabi). At the latter stage, two of the large government owned investment funds (Mubadala and IPIC) would also join the merge.
According to Citi officials, the emirate has summed-up significant fiscal reserves in recent years and that Abu Dhabi’s relatively cautions approach to spending oil boom met that there is a near-term fiscal imbalances.
“We can’t rule out the impact of business cycles on the local economy. If we look back, Dubai learnt a great deal from the financial crisis in terms of restructuring debts and the economy has been working hard at diversifying the economies. Today, despite low oil prices, the proposition of Dubai as a hub and the business it attracts is quite exceptional and no one can compare with that proposition in the region,” said Antonios.