UAE economy on track for early recovery

Dubai - Positive economic indicators, laying foundations for future, bode well for nation's GDP

The UAE, which is among the first countries in the world to start the recovery phase by mid-2020, is well on track to record robust growth in 2021 as per various economic indicators.

A detailed report on the current status of the UAE economy released by Emirates New Agency (Wam) in collaboration with the Federation of Arab News Agencies says that the Arab world’s second-largest economy showed a remarkable ability to overcome the impact of the pandemic, with the Central Bank of the UAE revealing that early recovery signs began to emerge in the second half of 2020. The UAE ranks first in the Arab region in the Covid Economic Recovery Index.

In December 2020, the UAE government received an Aa2 rating in creditworthiness — which is the highest sovereign rating in the region — with a stable outlook for the national economy by Moody’s.

“This is another testament to the success of the country’s financial and economic vision and policies, and the strength and stability of its economic, financial and credit sectors,” the report, which highlights the advancements of the nations on several fronts, said. In November 2020, Fitch Ratings awarded the UAE’s federal government with an AA- rating with a stable outlook.

In its report on the UAE’s sovereign credit profile, Moody’s pointed out that the country’s credit strength is supported by a high GDP per capita, as well as by its internal stability and strong and broad international relations.

The Central Bank of the UAE expected robust GDP growth in 2021, as the government is continuing its efforts to diversify the economy, boost spending on infrastructure and encourage private investment, as a gauge for growth and private sector employment.

The World Bank has predicted that the $414 billion UAE economy would grow by 2.4 per cent in 2022, after a contraction of 6.3 per cent in 2020 and a one per cent rise projected for 2021.

The Washington-based Institute of International Finance expects modest economic recovery for the UAE in 2021 with real GDP growing by 2.3 per cent, following a contraction of 5.7 per cent in 2020. It predicted three per cent growth for the next year, 3.4 per cent for 2023 and 3.5 per cent a year later.

The UAE central bank said despite the extraordinary global conditions caused by the pandemic, there is optimism due to some early signs of a rise in international trade, such as the gradual lifting of movement restrictions, the issuance of bonds and sukuk, the resumption of activities in capital markets, steady negative inflation rates, the return of spending levels to normalcy, the rise of the national employment rate to 1.7 per cent per month in December, and the monthly rise of real estate sale prices.

Several positive signs emerged in the UAE’s oil and gas sector in 2020, most notably with the success of Abu Dhabi National Oil Company (Adnoc). Adnoc’s major achievements in 2020 included the discovery of a new natural gas field in an area between Seih Al Sedirah in Abu Dhabi and Jebel Ali in Dubai, containing massive stocks totalling some 80 trillion cubic metres.

The Supreme Petroleum Council also announced the discovery of 22 billion stock tank barrels (STBs) of non-conventional and recoverable crude oil in Abu Dhabi. IT also announced the addition of two billion STB to the country’s conventional oil reserves, increasing the UAE’s conventional oil reserves base to 107 billion STBs of recoverable oil.

Adnoc attracted foreign direct investments worth Dh62 billion to the UAE, with total FDIs attracted by the oil major since 2016 are valued at Dh237 billion.

The total value of the UAE’s non-oil foreign trade during the first nine months of 2020 amounted to Dh1.03 trillion, according to the National Competitiveness and Statistics Centre’s figures. The country’s trade balance registered an excess for the first time last year, posting 15 per cent in September 2020, as well as a 5.6 per cent growth in third-quarter exports.

In real estate, the value of registered transactions in 2020 amounted to nearly Dh275 billion, including land, residential, commercial and industrial unit sales, as well as mortgages and grants. E-commerce witnessed a substantial rise in the UAE during the coronavirus crisis, with the value of digital transactions in 2020 amounting to $18.50 billion.

In the aviation sector, Dubai International Airport made significant positive steps towards recovery after a challenging year, handling 25.9 million passengers in 2020.

Etihad Airways announced that it transported 4.2 million passengers last year, recording proceeds of $1.2 billion in 2020. It also performed strongly in terms of shipping, with a 66 per cent increase in proceeds, surging from $700 million in 2019 to $1.2 billion in 2020.

— issacjohn@khaleejtimes.com