Statistics and credit bureaus soon
By Saifur Rahman, Business News Editor GULF NEWS Published: October 09, 2007, 23:50
Dubai: The UAE will establish a National Bureau of Statistics (NBS) and a Federal Credit Bureau by the end of this year, the International Monetary Fund (IMF) said yesterday in its latest country report.
The move will be followed by several statistical surveys, currently in the preparatory stage, including a study on household income and expenditure in line with UAE’s efforts to formulate a consumer price index (CPI) to measure real inflation – one of the major woes impacting the lives of its more than 4.5 million residents.
The report, Article IV Consultation 2007 with the UAE, “welcomed the prep-arations to introduce a Value Added Tax (VAT) system at the federal level.”
“Efforts to address the weaknesses of economic statistics at the national level have intensified. Work is under way to improve consumer price data and to establish the NBS by end-2007,” said the report, a copy of which is in possession of Gulf News.
The UAE’s real GDP growth exceeded 9.4 per cent in 2006, with oil production rising by eight per cent and non-oil sectors growing at double-digit rates.
Dr Mohammad Al Asoomi, a UAE-based economist, said a high VAT could hurt the consumers.
“The authorities should introduce VAT from a low base and then gradually bring it up to the five per cent level,” he told Gulf News. “However, it should be a GCC-wide move and not an individual national move.”
Strong domestic demand and housing shortages have led to sharp rises in rents and contributed to upward pressure on other prices. As a result, the CPI inflation exceeded 9.3 per cent in 2006, the IMF said.
The IMF observed that although the assessment of inflation is complicated by data weaknesses, the rate of price increases, driven mainly by strong demand for housing, is too high.
“However, the anticipated reduction of capacity constraints – especially in the housing market – is likely to reduce inflation pressures over the medium term,” the report said.
“Fiscal policy could play a greater role in regulating domestic demand. In particular, expenditure increases – including by public and quasi-public entities – should be consistent with the country’s absorptive capacity. This, together with efforts to alleviate capacity constraints, would help subdue inflation and support a continued economic expansion with macroeconomic stability.”
Reflecting record oil prices, the overall fiscal and external current account surpluses remained large in 2006, and have allowed further accumulation of official foreign assets.
The medium-term outlook is very positive with real GDP growth projected to remain strong in 2007, and slightly decelerating thereafter due to temporary capacity constraints.
The fiscal and external accounts are projected to remain in large surplus. IMF agreed that “the key challenges will be to ensure sustained noninflationary growth and further diversification of the economy.”
The IMF report agreed that the peg of the dirham to the US dollar has served the UAE well. “The exchange rate of the dirham is in line with fundamentals,” the report said, adding, “Further structural reforms would help to sustain the UAE’s competitiveness.”
The IMF appreciated the authorities’ commitment to work closely with other GCC member countries to a reach consensus on the appropriate future exchange rate regime to be adopted as part of the GCC currency union.
The IMF welcomed steps to enhance the supervision of capital markets and efforts to update the banking law and the company law.
“These steps would, inter alia, remove barriers to foreign participation in UAE markets and help protect shareholder rights,” the report said.
The IMF report called on the authorities to move ahead to enact the draft securities law, encourage the listing on the equity market of large quasi-public enterprises, and promote an increased role for institutional investors in the markets.