The International Monetary Fund (IMF) has revised growth outlook of the UAE in its latest World Economic Outlook by more than doubling its previous GDP growth forecast of 1.3 per cent for 2021.
In its revised outlook, the IMF has forecast the UAE and Saudi Arabia to grow 3.1 per cent and 2.9 per cent, respectively in 2021 against estimated contractions of 5.9 per cent and 4.1 per cent last year.
The IMF’s latest forecast is an emphatic affirmation of UAE’s own assessment of its economic rebound. Earlier this year, the Central Bank of UAE (CBUAE) had forecasted the UAE GDP growth to pick up to 2.5 per cent and 3.5 per cent, respectively in 2021 and 2022.
While the World Economic Outlook points to green shoots across the global economy, the IMF has recognised the strong recovery taking shape across the GCC. While Oman is projected to move out of recession this year with a 1.8 per cent GDP growth, Bahrain is expected to grow 3.3 per cent. Kuwait is forecast to grow at the lowest rate in the GCC with 0.7 per cent as Qatar has a slightly better growth outlook at 2.4 per cent for 2021.
After an estimated contraction of 3.3 per cent in 2020, the global economy is projected to grow at 6 per cent in 2021 and moderating to 4.4 per cent in 2022. The revised estimate of contraction for 2020 is 1.1 percentage points lower than projected in October, reflecting the higher-than-expected growth in the second-half of 2020 for most regions after lockdowns were eased.
Economic recoveries are diverging across countries and sectors, reflecting variation in pandemic-induced disruptions and extent of policy support. Advanced economies are projected to grow 5.1 per cent compared to a 4.7 per cent contraction last year, with the US and Eurozone estimated to grow 6.4 per cent and 4.4 per cent.
For the Emerging and Developing Asia, projections for 2021 have been revised up by 0.6 percentage point, reflecting a stronger recovery than initially expected after lockdowns were eased in some large countries such as China and India.
Virus and vaccines
Clearly, the global growth outlook depends not just on the outcome of the battle between the virus and vaccines, it also hinges on how effectively economic policies deployed under high uncertainty can limit lasting damage from this crisis.
Thanks to the unprecedented policy responses by governments and central banks across the world, the COVID-19-induced recession is fading, although second and third waves of infections remain a downside risk.
The UAE was one of the countries that deployed aggressive fiscal and monetary policy tools in addition to macroprudential measures to support economic growth right from the early days of the crisis. The results are now self-evident.