The United Arab Emirates’ central bank stood by its forecast for a return to growth in 2021 after lower crude prices and pandemic restrictions hit the Arab world’s second-largest economy.
“Economic activity is still subdued but recovering,” Governor Abdulhamid Saeed Alahmadi said. The government will continue to diversify the economy, fund infrastructure improvements and encourage private investment, he said. In December, the bank forecast growth of 2.5% in 2021.
Utilization of a stimulus program of capital and liquidity measures to help the economy through the global health crisis has fallen to about 50% of its peak, he said, indicating “that banks are now gradually coming back to manage their credit books and navigate the way forward.”
Economic Woes
UAE GDP is set to shrink in 2020 amid Covid disruptions and low oil prices
Source: UAE National Bureau of Statistics and central bank
UAE Economy Seen Contracting More Than Estimated This Year
The nation’s lenders and financial institutions reported “encouraging” results last year showing resilience in the banking system, the governor said. Gross assets, deposits and lending all increased marginally in 2020. The governor also said:
- The central bank has approved banks’ requests for more than 15 billion dirhams ($4.2 billion) in dividends.
- Consumer confidence returned to normal in December, though employment rate rose 1.7% from November.
- The central bank and the government stand ready to help businesses.
The International Monetary Fund predicts the economy to rise 1.3% this year after having contracted an estimated 6.6% in 2020.
The UAE has rolled out an aggressive inoculation program and aims to vaccinate 50% of its 10 million population by the end of March.
“The rapid pace of vaccination is a great comfort,” the governor said.
