The UAE economy is expected to expand by 5.4 percent annually this year, driven by the country’s success in containing the health and economic impacts of the coronavirus pandemic.
This is what was addressed in the annual report issued by the UAE Central Bank for the year 2021, which indicated that real non-oil growth is expected to reach 4.3 percent, down from 5.3 percent in 2021, and is further to decline to 3.9 percent in 2023.
GDP growth will however support a strong 8 percent jump in the oil economy in 2022, which is expected to grow by another 5 percent next year amid higher crude oil prices, and this from negative growth of 0.1 percent in 2021.
The second largest economy in the Arab world, which expanded by 3.8 percent in 2021, is expected to grow by another 4.2 percent in 2023 as the growth momentum continues.
In its report, the Banking Supervisory Authority stated that the estimates of real GDP growth for 2022 were higher than the forecast of 4.2 percent set by the Central Bank in April.
At the beginning of the report, Sheikh Mansour bin Zayed, Deputy Prime Minister and Minister of Presidential Affairs and Chairman of the Board of Directors of the Central Bank, said: “Despite the many economic challenges caused by the Covid-19 pandemic in 2021, the UAE was able to excel on the economic front, and even improve its competitiveness. Thanks to the comprehensive vision and policies enacted by our leadership in a timely manner.”
He added, “The International Monetary Fund referred to our country’s unique ability to face the repercussions of Covid-19 in its annual report for 2021, which praised the UAE for its strong and proactive response to the effects of the epidemic,” noting that the IMF report indicates the country’s continued push to implement policies that aim to support economic growth.
The IMF expects the UAE economy to grow by 4.2 percent this year.
For his part, the Governor of the UAE Central Bank, Khaled Balama, said that the year 2021 was a mixture of challenges and opportunities, and that the central bank played a decisive role in guiding the nation through the economic challenges of the epidemic.
Current account surplus
The UAE economy has rebounded strongly, which the UAE Central Bank estimated to have contracted by 4.8 percent in 2020 on the back of the global economic slowdown.
The recovery has been driven by epidemic mitigation measures and a 388 billion dirhams ($105.72 billion) package in financial and monetary support since the start of the global health crisis.
The Central Bank said that the UAE’s current account surplus in the balance of payments rose to 176.2 billion dirhams in 2021 from 77.5 billion dirhams in 2020, with an increase in oil and non-oil exports.
The banking sector
According to the report, the UAE banking system remained strong last year with good levels of capitalization and liquidity.
Sheikh Mansour said that the flexibility that characterizes the banking and insurance sectors “played a prominent role in defining a standard for dealing effectively with future crises, without compromising the principles of sound risk management,” explaining that this matter is in line with international best practices, “which enhanced confidence and credibility in the financial services sector in the country.”
Balama emphasized that the banking system enjoys a good level of capital and liquidity, and has the ability to support the country’s growth plan. He added that stress tests, which were conducted to explore potential weaknesses in banking sector institutions, showed that the country’s financial system is resilient and able to withstand various negative scenarios, while maintaining adequate levels of capital and liquidity.
On this point, the governor said, “With regard to measures to combat money laundering and combat the financing of terrorism, the Central Bank is developing its policies, regulations and procedures in accordance with the best practices and international standards. It has developed an infrastructure to counter money laundering and combat the financing of terrorism in coordination with the National Committee to Combat Money Laundering and Combat the Financing of Terrorism, and the Financing of Illegal Organizations, to ensure the provision of safe and highly transparent financial services in the country. The Central Bank will continue to work closely with the Financial Action Task Force and other international bodies to confront financial crimes in its various forms.”