The UAE Central Bank expects economic recovery to begin in the second-half of this year after it has been hit by the coronavirus pandemic.
“While recovery of economic activity is projected to commence in the second half of the year, recovery of economic sentiment will hinge on deploying policy support measures. The Targeted Economic Support Scheme (TESS) by CBUAE and the economic stimulus packages announced by both local and federal governments are likely to weigh in positively on the Purchasing Managers’ Index, real estate prices, employment and credit growth with a positive impact on the overall sentiment once the virus risks are under control,” the apex bank said in its first-quarter 2020 report released on Wednesday.
Under its TESS programme, Dh256 billion has been allocated as part of a stimulus package to support economy from the virus impact.
The UAE, according to the Central Bank, saw mixed movements in economic activity 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 amid the precautionary measures related to the Covid-19 pandemic,” it said.
The UAE government, in line with the recommendations of the World Health Organization (WHO), established partial restrictions to limit the spread of the coronavirus, which constrained domestic economic activities, tourism, and consumption.
Non-oil GDP is estimated to have declined by three per cent in Q1 2020 with growth momentum coming to a halt from March.
“It is projected that the second quarter would encounter a sharp contraction of the non-hydrocarbon GDP year-on-year, that could linger, albeit at a milder pace, in the third quarter, assuming the virus is contained,” said the first-quarter report.
The non-energy growth contraction is projected at 4.1 per cent for 2020 due to the adverse implications of Covid-19 on economic activity and sentiments, slowdown in credit growth, and employment across the UAE.
Moreover, given the UAE’s commitment to oil production cuts following Opec+ agreement to cut production by 9.7 million barrels per day effective May 2020, oil GDP growth is estimated to contract by 2.4 per cent in 2020.
Overall, GDP growth for the year 2020 is expected to contract by 3.6 per cent, according to the Central Bank estimates.
During the first quarter of the year, however, oil production increased by 3.7 per cent as the long-lasting deal on production cut came to end and Opec+ talks collapsed in March of this year.
In line with the agreement by Opec+, the UAE average oil production is projected at 2.984 million barrels per day in 2020.
Central Bank figures showed that outward remittances in Q1 increased by 7.8 per cent or Dh3 billion compared to the same period of 2019, reaching Dh41.4 billion.
The outward personal remittances that were settled through the banks increased by 16.9 per cent or Dh1.4 billion.
Meanwhile, the outward personal remittances that were settled through the exchange houses registered an increase of 5.4 per cent or Dh1.6 billion, compared to the same period of 2019.