The UAE economy is expected to record a 4.2 per cent economic growth this year due to strong rebound in oil prices while its non-hydrocarbon real gross domestic product (GDP) will grow by 3.9 per cent, latest data shows.
The Central Bank of the UAE said growth in the oil sector’s GDP is set to be at five per cent this year, reflecting an increase from last year’s two per cent contraction.
“Non-oil GDP is expected to remain in line with 2021 while economic projections are susceptible to uncertainties amidst Covid-19 repercussions,” according to the Quarterly Economic Review of the Central Bank of the UAE.
Economic activity in the UAE continued its upward trend in the third quarter of 2021 and the central bank maintained its real total GDP growth forecast that will hit 2.1 per cent last year, with the real non-hydrocarbon GDP projected to increase by 3.8 per cent.
The International Monetary Fund (IMF) expects the UAE’s economy to grow more than three per cent this year and hover around the same levels into 2026 at least.
With reference to global economy, the central bank said economic growth momentum was maintained in the third quarter of 2021. The IMF forecasts 5.9 per cent growth for the year, as downward revision for developed economies was offset by upward revision for emerging and developing economies.
Saad Maniar, a senior partner at Crowe, oil price will remain high on hopes of rising demand in 2022, despite Opec looking to agree to the output increase and concerns about how rising Covid infections might affect demand. This higher oil price will certainly benefit UAE economy, he said.
“The business sentiments in UAE looks very positive at the moment and Dubai chamber projections are also positive. This confidence will contribute towards the growth in GDP. However, the key economic drivers, transportation, tourism, real estate and retail remain dependent on how the uncertainty unfolds in 2022,” Maniar told Khaleej Times on Saturday.
He said Expo 2020 Dubai and the new Monday-Friday working week is expected to improve the prospects of UAE trade and also contribute towards productivity, health and well-being.
Shailesh Dash, a Dubai-based entrepreneur and financier, said the UAE economy has a bright prospects ahead.
“We are very positive about UAEs economic growth rate in the current year backed by the Expo, growth in the RE, Financial and the tourism segments compared to the previous years. Lots of positive work has been done by the UAE govt in the last 12 months including regulatory changes as well as investments in the economy. The positive affect of all the above should be seen by the economy in the coming years even though the risk from the pandemic still remains,” Dash told Khaleej Times on Saturday.
The central bank expects that steady increase in public spending, positive outlook for credit growth, higher employment and better business sentiment will benefit the economy.
Latest PMI data published by IHS Markit showed that the UAE economy posted rapid growth in the non-oil private sector economic activity in December. Data showed higher new orders continued to support expansion in non-oil private sector activity last month.
Crude prices, which gained nearly 60 per cent in 2021, edged up during the first trading week of this year. Global benchmarks Brent and WTI registered gains of more than five per cent in the first week of the year, with prices at their highest since late November.
Inflation turns positive
The central bank said headline CPI inflation rate in the UAE turned positive during the third quarter, for the first time since the fourth quarter of 2018. The inflation rose 0.6 per cent year-on-year basis, as tradable and non-tradable inflation remained at 1.5 per cent and 0.1 per cent, respectively. Inflation for the year is expected to remain roughly flat.
“Year-on-year residential real estate sales prices in Abu Dhabi rose for a third consecutive quarter, following five years of decline, while declining in Dubai at a marginal pace. Both, the dirham effective nominal and real rates depreciated year-on-year basis due to lower inflation compared to main trading partners and in line with the US dollar trend,” the central bank said.
Sound financial system
The UAE’s central bank data showed that total bank deposits increased on both yearly and quarterly basis. Gross credit contracted on a yearly basis, but the pace of decrease eased with a moderate growth during the quarter.
“Overall, the financial soundness indicators remained adequate during this period, on the back of the gradual recovery of the economy. The central bank reaffirmed during the quarter its continued commitment to supporting the economic recovery through the Targeted Economic Support Scheme and confirmed that withdrawal of the emergency measures introduced in response to the pandemic will be gradual and appropriately timed,” according to the report.
They have long-standing security alliances with the US and also count China as their largest trading partner.
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