UAE economy recovering fast, says Central Bank governor

Photo: Reuters
Photo: Reuters

Dubai - Banks lessen use of Central Bank’s Covid-19-induced stimulus package.

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By Waheed Abbas

Published: Tue 9 Feb 2021, 2:25 PM

Last updated: Tue 9 Feb 2021, 2:29 PM

Banks in the UAE have reduced the use of Central Bank’s Targeted Economic Support Scheme (TESS), which was launched last year in a bid to support local financial institutions and the private sector against the Covid-19 pandemic and also to ensure liquidity in a depressed market.


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“The utilisation of the TESS programme, which has now come down to about 50 per cent from its peak, is a strong indicator that banks are gradually coming back to manage their credit books and navigate the way forward. The Central Bank had approved in excess of Dh15 billion (b) in dividends, based on their compliance with supervisory requirements,” said Abdulhamid M Saeed Alahmadi, the Governor of the UAE’s Central Bank.

Alahmadi said banks and financial institutions in the UAE have displayed robustness, despite the contagion’s relentless onslaught.

The Central Bank had announced a $70b stimulus package in March 2020 and some of the support measures under this stimulus package were later extended till June 2021.

He noted that the financial figures presented by banks and other financial institutions for the last financial year are encouraging and show the resilience that the banking system has built over time.

“The banking system’s gross assets, deposits and lending have all increased, albeit, slightly. The more than adequate levels of capital (18.2 per cent, tier 1 of 17.1 per cent) and eligible liquid asset ratio (18.4 per cent) in the system, alongside sufficient levels of provisioning, means that banks and financial institutions in the UAE have displayed robustness in the face of the pandemic’s onslaught. While profit may be down for some banks, they are due to the impact of a bad year, rather than a fundamental shift in solvency and the appetite to do business,” said Alahmadi.

Strong rebound likely in 2021

He said the UAE’s economic activity is still subdued but recovering fast and the country will see a strong return to growth this financial year.

“Economic activity is still subdued, but recovering, based on the December ‘Google Covid-19 Community Mobility Report’. We predict a strong return to growth in GDP (gross domestic product) for the UAE in 2021 as the government continues to diversify the economy, provide strong infrastructure spending and encourage private investments both as a measure of growth and employment,” Alahmadi said.

“As of December 31, 2020, there were a number of positive signs in the market which have been quite heartening, as there were a number of bond and sukuk issuances as capital markets activity came back to normal,” he added.

He cited that the signs of recovery in the fourth quarter of 2020 were also validated by a number of data points, including the Purchasing Managers Index (PMI) having been above the 50 threshold and the employment rate in the UAE in December, proxied by the Central Bank Wage Protection System, increased by 1.7 per cent on a month-on-month (MoM) basis.

Real estate sales prices, which were at a standstill for a while, showed an increase on MoM basis, specifically in terms of valuations and rental yields.

Alahmadi assured that the government would continue to provide impetus to both existing and new businesses.

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