IMF publishes UAE end-of-mission report

The IMF has published its end-of-mission report following its recent trip to the UAE, with the staff team stating that ‘Overall real GDP is projected to grow by around 4.0% in 2024’, which marks a boost to the outlook from the Fund’s previous projection of 3.5% this year. The IMF expects the growth to be driven by ‘robust activity in the tourism, construction, manufacturing, and financial services sectors’ and by an anticipated expansion in hydrocarbon GDP on ‘higher crude oil production.’ We forecast a slower headline growth rate of 3.3% this year as while we share a relatively bullish outlook on the non-oil sector, we expect another year of flat growth in oil GDP. The IMF sees inflationary pressures as contained this year, and expects that fiscal and external balances will ‘remain high’, even as ‘capital spending is expected to meet ongoing infrastructure needs.’ The Fund encouraged ongoing efforts at widening the fiscal base and boosting transparency.

The Dubai World Trade Centre has reported its numbers for 2023, with a total of 76 large events held at the venue having generated AED 18.3bn, with over half of that retained within the local economy. This marked a 40% increase on the previous year, reflecting the robust growth in the sector. The events business in the UAE is an increasingly important component of the economy as it helps support a range of wider sectors including transport, retail trade, and hotels and restaurants. Nearly half of the 1.5mn people attending events at the DWTC were from abroad, so the venue was a material support in leading to Dubai to record visitor numbers last year.

CPI inflation in Kuwait was at 3.2% y/y in April, up from 3.0% y/y the previous month. Prices were 0.3% higher than in March. A notable driver of the price gains was food and beverage prices which were up by 5.8% y/y and 0.9% m/m. Price data for Qatar also released yesterday showed softer inflation than in Kuwait, with the annual figure at just 0.7% in April, down from 1.0% y/y in March. This marked the softest annual price growth since March 2021.

Today’s Economic Data and Events

10:00 Germany PPI inflation, % m/m, April. Forecast: 0.3%

16:30 Canada CPI, % y/y, April. Forecast: 2.7%

Fixed Income

• There has been little in the way of meaningful data that might move markets, but Fed officials have been speaking with the general tone striking a slightly hawkish note. More commentary from officials is expected today and we have the Fed meeting notes released later this week also.
• The hawkish tone weighed on USTs yesterday, with yields on the 2yr adding 2bps to 4.8478%, while the 10yr yield also added 2bps to 4.4433%.

FX

• The dollar gained ground against its peers yesterday as the DXY index closed up 0.1% on the day, but there was little in the way of major movement. GBP closed flat at 1.2706, but EUR closed down 0.1% at 1.0857.
• Commodity currencies were mixed, with the AUD losing ground against the greenback, down 0.4% to 0.667 while NZD fell 0.5% to 0.6105, but CAD added 0.1% to 1.3625.

Equities

• Equity markets started the week on the front foot as Asian markets followed Wall Street’s Friday gains. The Hang Seng closed up 0.4%, the Shanghai Composite added 0.5%, and the Nikkei 0.7%.
• The momentum continued when European markets opened, with indices boosted by mining stocks as commodity prices headed to new highs. The FTSE 100 pared gains later in the day to close up just 0.1%, but the CAC and the DAX both added 0.4%.
• In the US, the Dow Jones dropped 0.5% to close back below the 40,000 mark, while the S&P 500 added 0.1% and the NASDAQ 0.7%.

Commodities

• Oil prices shrugged off events in Iran yesterday, with Brent futures closing down 0.3% to USD 83.7, while WTI also fell 0.3% to USD 79.8/b.