Central bank lifts UAE growth outlook

Real GDP to grow at 2.7 per cent in 2018 from 1.5 per cent in 2017.

The Central Bank of the UAE lifted its growth forecast for the country's non-oil GDP to 3.9 per cent in 2018 from 3.6 per cent on the back of improving domestic economic activity and better prospects for the global economy.
Economic activity in the UAE has continued to improve during the first quarter of 2018, underpinned by the revival of oil prices and a stronger growth in the non-oil activity, the regulator said.
The CBUAE, however, cut forecast for oil GDP marginally because of lower than expected oil output in the first quarter of this year.
The Central Bank's Economic Composite Index (ECI) estimates that non-oil economic activity in the Emirates grew by 3.1 per cent from a year earlier in the first quarter 2018, slowing slightly from 3.4 per cent in the final quarter of 2017,
In its Quarterly Economic Review, the regulator estimated real GDP to grow at 2.7 per cent in 2018 from 1.5 per cent in 2017. For 2019, the Central Bank expects overall GDP to expand 3.1 per cent on the back of 4.3 per cent growth in the non-oil economy and a 0.1 per cent upswing in oil GDP.
The International Monetary Fund said early this month the UAE non-oil economy was set for a strong rebound with a projected growth of 2.8 per cent in 2018 and 3.3 per cent in 2019 after a slowdown to 1.9 per cent in 2017.
Jihad Azour, director of the IMF's Middle East and Central Asia Department, said the UAE would need oil prices to average $71.5 and $64.8 per barrel respectively in 2018 and 2019 to balance its budget.
Economists at FocusEconomics said along with the new UAE investment law that would further boost FDI inflows, looser fiscal policy and large investments in infrastructure, should prop up growth in the non-oil economy by supporting private investment momentum.
"This, along with higher oil prices and tourism, is poised to help private consumption bounce back from the VAT implementation."
Official Central Bank statistics show that a total of Dh14 billion in cash has been pumped onto the market by the regulator in April, the highest liquidity injected by the lender since the beginning of the year.
The move resulted in reducing the value of CBUAE's certificates of deposit to Dh118.3 billion from Dh134.3 billion in March.
The fall in liquidity held by UAE banks over recent period has been attributed by industry analysts to tightened lending measures in addition to other arrangements adopted by CBUAE to ensure the smooth operation of the country's financial landscape.
According to CBUAE figures, the certificates of deposit dropped to Dh132.4 billion in January from Dh135.1 billion in December 2017.
In its latest "Financial Stability Report," Governor of CBUAE, Mubarak Rashed Al Mansoori, noted that the UAE banking sector remains resilient, with robust capital ratios, liquidity buffers, profitability, and stable sources of funding."
"The Central Bank is moving towards a risk-based supervisory framework, enhancing its banking and financial system surveillance, and implementing more comprehensive stress-testing and macro-prudential frameworks. Furthermore, CBUAE continues to be committed to further enhancing banking regulation in line with international agreed standards and best practices," said Al Mansoori.
He said the improved economic outlook as well as more favorable financial market conditions remained supportive of financial stability in the UAE. "However, the financial system participants must continue to adequately manage financial risks and remain mindful of potential global and regional macro-financial uncertainties."
The UAE banking sector remained well capitalised, with solid liquidity buffers, stable funding, and improved profitability. The liquid assets of the banking sector increased and stable funding indicators improved, the bank noted.
- issacjohn@khaleejtimes.com