The economic activity of UAE will witness a complete recovery in 2022 while turning to positive growth this year itself after posting a deep fall in 2020, the Central Bank of the UAE (CBUAE) stated.
A continued increase in fiscal spending, healthy banking sector credit growth, strong improvement in employment, and recovered business sentiment as well as part of Expo 2020 Dubai taking place in 2022 will be the key reasons to open the path for a complete recovery.
For 2021 and 2022, CBUAE predicts real total GDP to resume growth by 2.5 percent and 3.5 percent and non-hydrocarbon real GDP to grow by 3.6 percent and 3.9 percent, respectively in each year.
“However, economic projections include exceptional uncertainty amidst COVID-19 repercussions and are thus subject to revisions,” CBUAE stated in its Quarterly Economic Review.
The UAE’s economic activities got into the recovery path in the fourth quarter of last year. Non-oil sectors improved further in the three months as lockdowns were eased and when the country started the initial phases of vaccine distribution.
The central bank estimates real total GDP growth for the year 2020 to be -5.8 percent, with real non-hydrocarbon GDP projected to fall by 5.7 percent.
The consumer price inflation remained negative in the fourth quarter. This was a result of a significant drop of 3.5 percent in the price of non-tradable due to a decline in rents and the price of fuel, in tandem with overall subdued domestic demand.
The residential real estate price decline slowed significantly in the fourth quarter of 2020, with prices in Abu Dhabi registering monthly gains in all months of the second half of last year and employment picked-up, marking four consecutive months of increase as of December.
Considering the consolidated fiscal stance in the third quarter of 2020, the most recent period for which data is available, the operating fiscal balance recorded a deficit of $1.2 billion, due to the fall in revenues by 38 percent year-on-year to $18.4 billion, while expenditures declined by 21.7 percent to $19.7 billion.
The financial soundness indicators remained strong with the support of the enhanced Targeted Economic Support Scheme (TESS), which was extended in November to prolong loan repayment deferrals and other regulatory relief measures until June 2021, the bank said.
“Furthermore, with Qatar’s 2022 Fifa World Cup competition taking place during the year and the UAE being the major tourism, transit and trade hub in the region, the UAE is expected to benefit from the event,” the Central bank added.
Being an oil exporter, the UAE is expected to get affected by the reduced global demand for oil due to the contraction in economic activities worldwide, including transportation and international travel.
UAE oil production fell by 17.7 percent year-on-year in the third quarter and by 18.2 percent in the fourth, in line with the agreement by Opec+. Real oil GDP is estimated to have contracted in 2020, corresponding to average oil production of 2.78 million bpd for the year as a whole.
Related: Global economy to uptick 4.7% in 2021; UNCTAD report