The International Monetary Fund lifted its forecasts for economic growth in the United Arab Emirates because of expectations that oil production and state spending will rise. UAE is now likely to expand 2.9 percent this year and 3.7 percent next year, Natalia Tamirisa, IMF mission chief to the country, said on Sunday. Gross domestic product grew 0.8 percent in 2017, preliminary UAE data showed. “The UAE economy has been adapting well to a prolonged decline in oil prices since 2014. A gradual recovery in non-oil activity is underway,” she said. “Non-oil activity remains subdued amid continued corporate restructuring, real estate overhang, and tightening financial conditions,” Tamirisa said in a statement after annual consultations between the IMF and the UAE. “Inflation is projected at 3.5 percent this year owing to the introduction of the value-added tax and should ease afterward.” The introduction of VAT in 2018 has been a historic milestone and is expected to substantially strengthen and diversify government revenues in the coming years, she stressed. On corporate taxation, she said that over the medium term, as the economic recovery gains momentum, a return to the path of gradual fiscal consolidation would help save an adequate portion of the exhaustible oil income for future generations. Dubai’s economy is set for a strong growth as its gross domestic product is set to expand 3.3 percent this year and 4.1 percent next year, Tamirisa said. Dubai’s GDP grew 2.8 percent last year, she added. While Abu Dhabi’s non-oil economy is expected to grow 2.3 percent in 2018 and 3.6 percent in 2019, as the government ramps up spending. Commenting on Dubai government finances, Tamirisa said that it is not a source of concern. She pointed out that the ratio of Dubai’s public debt to GDP is manageable at 30 percent, not high by international standards, and is expected to rise only moderately in the next couple of years as Dubai prepares to host Expo 2020.