Mon, Nov 11, 2024 | Jumada al-Awwal 9, 1446 | DXB ktweather icon0°C

UAE Central Bank raises economic growth forecast

The apex bank predicted the 2025 GDP growth at 6%

Published: Thu 26 Sep 2024, 6:48 PM

Top Stories

The Central Bank of the UAE (CBUAE) raised its forecast for 2024 GDP growth to 4.0 per cent from a previous forecast of 3.9 per cent, citing improvement in the oil sector’s performance.

The apex bank predicted the 2025 GDP growth at six per cent, propelled by the UAE’s diversification strategy on the back of a spate of bilateral Comprehensive Economic Partnership Agreements (Cepas). The Cepa programme is expected to grow the country’s exports by 33 per cent and contribute more than Dh153 billion to its gross domestic product by 2031. The country, which aims to sign 26 Cepa deals, has already signed trade treaties with India, Turkey, Israel, Cambodia and Georgia, while talks are underway with Japan, Serbia, New Zealand and Ecuador.

In the first six months of this year, the UAE’s non-oil foreign trade hit a record Dh1.4 trillion as a 25 per cent year-on-year surge in non-oil exports helped the aggregate non-oil foreign trade jump 11.2 per cent on an annual basis, the latest government data shows.

In its Financial Stability Report for 2023, the central bank noted that the UAE benefitted from favourable domestic conditions in 2023, which shielded the financial system from adverse global economic trends. The UAE’s real GDP grew by 3.6 per cent in 2023, driven by a robust 6.2 per cent expansion in the non-oil sector, particularly in tourism, real estate, and finance.

Khaled Mohamed Balama, Governor of the CBUAE, said the report underscored the strength and resilience of the UAE’s financial system amid global challenges. “Our on-going efforts to enhance financial infrastructure and implement robust regulatory measures are pivotal in supporting sustainable economic growth and maintaining the UAE’s position as a leading financial hub. We remain committed to proactive risk management and innovation to ensure the continued stability and competitiveness of our financial sector,” said the governor.

The report provides a comprehensive assessment of the stability of the UAE financial system and its developments and showcases the resilience of the UAE banking sector in 2023, which was evidenced by robust capital buffers, favourable liquidity conditions, improved asset quality ratios and increased profitability.

The CBUAE highlighted in its report global and local macroeconomic trends, money market developments, domestic asset markets, and provided a detailed assessment and evaluation of the UAE banking system, as well as non-bank financial institutions and the broader financial infrastructure.

Underlining the continued resilience of the UAE financial system that demonstrated the effectiveness of the CBUAE’s policy interventions, the report highlighted the variety of measures deployed by the apex bank under its macro-prudential mandate.

The report highlighted the stress test conducted by the CBUAE in 2023, which confirmed the banking system’s ability to withstand challenges including inflation and market uncertainty. Additionally, the CBUAE reaffirmed its commitment to sustainability and piloted a climate risk scenario analysis, which highlighted the required proactive mitigation measures.

According to the report, the UAE insurance sector remained resilient, with an adequate solvency position, continued growth in gross written premiums, and improved profitability. “Finance companies remained adequately capitalised, with further improvements in liquidity levels and overall profitability. The UAE exchange business continued to demonstrate resilience growth with a steady rise in business activities.”

The regulator noted that significant progress was made in enhancing financial stability within the UAE’s payments infrastructure in 2023 through key initiatives under the National Payment Systems Strategy. Al Etihad Payments, a new CBUAE subsidiary, was established to manage the everyday operations of the UAE’s critical payment systems with appropriate on-going oversight.

“Additionally, the Instant Payment Platform ‘Aani’ was launched with the participation of notable financial institutions to simplify payment functionality. Progress was also made on the Central Bank Digital Currency programme, with an initial launch of the Digital Dirham scheduled for 2024.”

The CBUAE said the UAE’s completion of the Financial Action Task Force (FATF) Action Plan requirements and exit from the enhanced monitoring process in March 2024 “recognised the CBUAE’s efforts in combating money laundering and terrorist financing, thereby strengthening the integrity of the financial system and preventing financial crime.”

The report noted that the UAE established the Financial Stability Council in 2023 to strengthen continued coordination. “This council aims to promote and protect financial stability, ensuring the financial system contributes effectively to sustainable economic development. The council’s collaborative approach will be critical in navigating future challenges and maintaining the UAE’s financial strength,” said the report.



Next Story