UAE economy expected to grow 2.4% in 2021; CBUAE

By Ashika Rajan, Trainee Reporter
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According to the Central Bank of the UAE (CBUAE), the Emirate’s economy is expected to grow 2.4 percent as the country steadily recovers from pandemic-induced restrictions.

The UAE’s non-oil economy is expected to grow at roughly 4 percent this year and next, while overall economic growth is expected to be 3.8 percent in 2022, the banking regulator said.

The central bank said in its 2020 Financial Stability Report that the UAE’s banking system remained resilient despite the challenges posed by the coronavirus pandemic.

Mr. Khaled Al Tameemi, Governor of the CBUAE remarked that “the overall banking sector remained profitable and the liquidity and solvency ratios returned to pre-COVID levels towards the year-end. The non-bank financial institutions, comprising of exchange houses, finance companies, and the insurance sector also demonstrated resilience.”

The UAE introduced economic support measures worth $105.6 billion after the COVID-19 pandemic threw the global economy into the worst depression since the 1930s. As part of its support measures, the central bank introduced a $13.6 billion Targeted Economic Support Scheme (Tess) to enhance liquidity in the financial and banking sector.

The Tess program, which offered banks zero-cost collateral funding to boost lending to the larger economy, has been extended until the end of June next year in an effort to further support the economy.

Mr. Al Tameemi pointed out that “one year after its introduction, it is satisfying to see that the Tess has yielded intended positive impact for the UAE’s banking sector and the economy. The overall banking sector liquidity returned to pre-COVID levels and the banking sector provided deferrals on loans and financing to more than 300,000 households, 10,000 small and medium enterprises (SMEs), and a significant number of private-sector corporations.”

According to the central bank, 309,393 people borrowed $1.3 billion worth of loans under the Tess scheme, while $1.4 billion went to 10,005 SMEs and $11.4 billion to corporates.

The regulator also stated that capital markets in Abu Dhabi and Dubai rose, with the combined market capitalization of the Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market (DFM) reaching $299 trillion last year, up 19.6 percent from 2019.

However, the central bank stated certain upside risks, such as the agreement in December on the terms of the UK’s exit from the EU, which has eliminated the no-deal Brexit downside risk.

Low-interest rates, continuous global fiscal stimuli, and rising stock exchanges could lead to bubbles,the regulator added. Similarly, swings in cryptocurrency prices could heighten the risks of drastic asset price corrections, according to the banking regulator.

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