The UAE’s economy is set to grow faster than Saudi Arabia’s in 2023, making the emirates the fastest growing in the Arabian Gulf, according to the latest figures from the International Monetary Fund (IMF).
The IMF is predicting the UAE’s economy will grow 4.2% next year, beating Saudi Arabia (3.7%), Bahrain (3%), Oman (4.1%), Kuwait (2.6%) and Qatar (2.4%).
For 2022, Kuwait will have the Gulf’s fastest-growing economy, at 8.7%, just edging out Saudi Arabia’s 7.6%, the IMF says. The UAE’s economic growth will hit 5.1% growth.
“The global economy is experiencing a number of turbulent challenges. Inflation higher than seen in several decades, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering Covid-19 pandemic all weigh heavily on the outlook,” the IMF wrote in its World Economic Outlook Report October 2022.
It added: “The global economy’s future health rests critically on the successful calibration of monetary policy, the course of the war in Ukraine, and the possibility of further pandemic-related supply-side disruptions, for example, in China.”
Globally, the IMF is predicting a slowdown in economic growth, with the world economy growing 3.2% in 2022, down from 6% in 2021, and then slowing further to 2.7% in 2023.
“This is the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the Covid-19 pandemic and reflects significant slowdowns for the largest economies,” the IMF said.
Overall, the IMF said that risks to its economic outlook “remain unusually large and to the downside”., warning that more energy and food price shocks could further deepen inflation and cause it to last longer.
The organisation called for monetary policy to remain on course to restore price stability as the route towards returning to global growth.
In addition, IMF fund appealed for multilateral co-operation between nations, warning that otherwise the global economy was at risk of fragmentation that could “reverse gains in economic wellbeing from 30 years of economic integration”.
Changes to UAE VAT rules
Meanwhile, the UAE’s Ministry of Finance has made amendments to the Value Added Tax (VAT) rules in the emirates. The changes will come into effect from 1 January 2023.
Among the changes is the provision that registered persons are allowed to apply for an exemption from VAT registration if all of their supplies are zero-rated, or if they no longer make any supplies other than zero-rated supplies.
Zero-rated supplies are supplies of property and services that are taxable at the rate of 0%. Zero-rated items include certain food and beverages, exported goods, donated goods sold by charity shops, equipment for the disabled and prescription medications, and is determined by the taxing authority.
Other changes include setting a 14-day period to issue a tax credit note to settle output tax, in line with the time frame set for issuing tax invoices.
A statement from the ministry added that the Federal Tax Authority (FTA) may forcibly deregister people in certain cases if it deemed it necessary.
No changes were announced to the VAT rate, which remains at 5%.
“The amendments have been made in line with international best practice in light of the Gulf Cooperation Council’s (GCC) Unified VAT Agreement. They are based on past experiences, challenges faced by various business sectors as well as the recommendations received from the relevant parties,” the statement. Said
The 5% VAT rate was introduced in the UAE at the beginning of 2018.
As well as these changes, the UAE’s Finance Ministry will also introduce a 9% federal corporate tax on business profits from the financial year starting on or after 1 June 2023.