Fiscal and monetary policy measures aimed at supporting growth have been at the centre of fighting the adverse economic fallout of COVID-19 around the world.
The various stimulus packages announced by governments and central banks aim to mitigate the difficulties faced by businesses from the outbreak of COVID-19 that followed full or partial shutdowns resulting in big losses.
The UAE government, both at the federal level and individual emirates level, has been in the forefront of supporting the businesses from the early days of the outbreak, when it became apparent that the economy and key business sectors are likely to face unprecedented impact from the economic disruption caused by the pandemic.
The latest in a series of economic support measures is the central bank’s decision to extend the key components of its stimulus package, the Dh256 billion Targeted Economic Support Scheme (TESS) announced in March 2020, until June 30, 2021.
The proactive extension of the support scheme, is clearly a testimony to the UAE leadership’s unwavering support to the private sector.
The extension of the stimulus time frame, particularly of the Zero Cost Facility (ZCF) of Dh50 billion, largely mitigates the cash flow difficulties faced by retail and corporate banking customers. In addition it facilitates liquidity management for banks through collateralised funding at zero cost, for an additional period of six months.
Beyond short term relief
The TESS succeeded in enhancing the UAE financial system’s capacity to support individuals and businesses affected by the COVID-19 repercussions. To date, the TESS loan deferral programme benefited more than 310,000 retail customers, nearly 10,000 small and medium sized enterprises, and more than 1,500 private sector corporates.
Going beyond the short term relief to those directly impacted by the COVID-19, the central bank and government stimulus measures are laying a solid foundation for the post-pandemic recovery of the UAE economy
Forecasts by various agencies such as the IMF, World Bank, Institute of International Finance and leading credit rating agencies see a sharp short-term dip in the UAE’s economic growth this year followed by a gradual, yet a steady recovery form 2021.
The UAE, one of the most open economies in the region, has been susceptible to global economic events. However, after every major global or regional crisis, the country has always managed to pull itself back to a growth trajectory that is stronger than before.
The government initiatives in treating private sector as a true partner is sure to yield positive results in post-COVID economic recovery. Clearly, the concerted efforts of various government agencies and the banking system, led by the central bank will ensure sustained rebound of the UAE economy.