The Emirate's economy expected to recover in the second half of 2020
The economic recovery of the United Arab Emirates (UAE) will begin in the second half of 2020, according to estimates by the Central Bank of the Arab country (CBUAE) included in its latest report for the first quarter. The institution thus anticipates that activity in the country will begin to return to good performance as early as the second half of the year after being hit hard by the COVID-19 disease health crisis.
The coronavirus pandemic forced governments around the world to implement tough measures to stop the spread of COVID-19, which has left hundreds of thousands dead and millions affected around the globe; government actions including imposed guidelines of social confinement and alienation that left most people locked in their homes and led to the temporary closure of countless businesses, resulting in a sudden halt in economic activity.
According to CBUAE estimates, in this scenario, the Emirates will start to recover from July onwards. The organization expects the economic recovery to begin in the second half of the year after being hard hit by the coronavirus pandemic, although it has the expected political support measures from the national authorities. "While the recovery of economic activity is expected to begin in the second half of the year, the recovery of economic sentiment will depend on the implementation of policy support measures. The CBUAE expects the Targeted Economic Support Scheme (TESS) and the economic stimulus packages announced by both local and federal governments are likely to weigh in positively on the PMI, real estate prices, employment and credit growth with a positive impact on the overall sentiment once the virus risks are under control", the Central Bank of Emirates said in its recent Q1 2020 report released Wednesday.
Within the TESS programme, up to 256 billion dirhams (about $69.12 billion) has been allocated as part of a stimulus package to support the economic upswing following the scourge of COVID-19. Along these lines, the UAE, according to the Central Bank, had mixed movements in economic activity during the first quarter. "The UAE economy performed well during the first two months of 2020. However, this was followed by a general slowdown in major activities amidst precautionary measures related to the COVID-19 pandemic," the bank explained. The UAE government, in line with the recommendations of the World Health Organization (WHO), which has been providing the main international recommendations for combating the coronavirus, established partial restrictions to limit the spread of the disease, which restricted economic activities, tourism and domestic consumption. It is estimated that the non-oil Gross Domestic Product (GDP) fell by 3% in the first quarter of 2020, with a growth momentum that stopped as of March. "It is projected that the second quarter would find a strong contraction of non-oil GDP year on year, which could persist, although at a slower pace, in the third quarter, assuming that the virus is contained," the quarterly report presented clarified.
The contraction in non-energy growth is projected at 4.1 per cent by 2020 due to the adverse implications of COVID-19 on economic activity, the slowdown in credit growth and employment in the UAE. In addition, given the Emirates' commitment to oil production cuts following the OPEC+ agreement to reduce production by 9.7 million barrels per day from May 2020, oil-linked GDP growth is estimated to contract by 2.4% in 2020. Overall, GDP growth for 2020 is expected to contract by 3.6%, according to Central Bank estimates. However, during the first quarter of the year, oil production increased by 3.7% as the long-standing agreement on cutting production came to an end and OPEC+ talks failed to bear fruit in March this year. In line with the OPEC+ agreement, average UAE oil production is projected at 2,984 million barrels per day by 2020.
Figures from the United Arab Emirates Central Bank showed that external remittances in the first quarter increased by 7.8 per cent, by Dirham 3 billion (about $810 million), compared to the same period in 2019, reaching Dirham 41.4 billion (about $11.178 million), as el Correo del Golfo also pointed out. External personal remittances that were settled through banks increased by 16.9%, some Dirham 1.4 billion ($378 million). Meanwhile, external personal remittances that were settled through exchange houses recorded an increase of 5.4%, or Dirham 1.6 billion (US$ 432 million), compared with the same period in 2019.