The Central Bank of UAE Hopes for Economic Recovery in the Last 2 Quarters of 2020
As the pandemic continues, economies around the world are suffering. The UAE’s economy is no exception. Despite its stellar performance in the last 2 years, things have been slow in 2020. Currently, UAE’s non-oil growth is expected to contract by 4.1% thanks to the pandemic.
The 1st quarter of 2020 had a good start for the UAE. In January and February, the economy was doing well for itself. But after the third month, the effects of the pandemic began taking their toll. UAE’s economy experienced a sudden and sharp contraction, especially in the non-energy sector. The growth rate was brought down by a large margin.
Despite the uncertainty, the CBUAE (Central Bank of UAE) expects to see the economy recovering in Q3. However, the CBUAE has also stressed that this will not happen on its own. The effective deployment of policy support measures will play a major role in economic recovery.
The CBUAE’s Targeted Economic Support Scheme (TESS) is going to have a positive impact on the economy. This, combined with the economic stimulus package being prepared by federal and local governments will help uplift things. Real estate prices, credit growth, employment, and the overall economic sentiment will benefit greatly.
As part of the TESS scheme, the CBUAE has set aside Dhs256bn in order to provide economic support.
The Non-oil Side of the Economy
As mentioned above, the non-oil economic growth is expected to contract by 4.1%. This is owed to the Covid-19 pandemic that is currently ravaging the world. The current economic sentiment created by this has led to slowdowns in credit growth, employment rates, and economic activity overall.
The oil-side of the economy is not looking good either. Being an open economy, the UAE is expected to take a hit as the demand for oil around the world is declining. Things seem even grimmer when you consider the fact that the tourism, trade, and hospitality sectors have come to a complete halt.
UAE’s respectable growth rate for foreign direct investment is expected to fall as well.
The Oil Economy
The UAE’s economy has benefitted hugely from its oil trade. Whether this shall remain true in the future is yet to be seen. The rise of electric vehicles can very well bring down the global demand for oil.
At the start of 2020, the UAE’s oil production went up by 3.7%. This was thanks to the expiry of the deal for cutting production and an end to the talks with the OPEC+.
But now, the UAE has agreed to oil production cuts with the OPEC+. From May 2020, the UAE will be cutting oil production by 9.7m barrels per day. A cut as huge as this is expected to contract the UAE’s oil growth by 2.4%. This will most definitely leave a mark on the country’s GDP in 2020.
Currently, the UAE’s daily oil production is projected to be around 2.984m barrels per day.