The world is facing an unprecedented health crisis that has triggered a global economic downturn, rupturing supply chains and crippling financial markets.
As economies around the globe grapple with a multi-dimensional crisis, the GCC countries including the UAE are witnessing a sharp contraction of economic growth.
While the COVID-19 pandemic affects GCC countries, a plunge in global oil prices in recent months has compounded stress on these economies, increasing challenges to combating the virus and preventing lasting damage to respective economies.
The UAE, one of the most open economies in the region, has historically 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.
In GCC countries, growth is projected to contract by 2.7 per cent in 2020. Non-oil activity is expected to be a major drag on the near-term outlook, contracting by 4.3 per cent this year, according to the International Monetary Fund (IMF).
The latest forecasts from the World Bank says the GCC’s real GDP growth could contract as much as 4.1 per cent this year before bouncing back to 2.1 per cent in 2021.
Resilient UAE
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 historically 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 post COVID-19 era too will be marked by the strong rebound of the UAE economy, thanks to the wide-range of government support, strong fundamentals, substantial financial reserves and the entrepreneurial spirit of the nation.
Ahead of the curve
Historically, the UAE has always been ahead of the curve in supporting its economy compared to many of its global and regional peers every time a crisis approached its shores. The country has lived through a number of regional wars, geopolitical tensions and a global financial crisis during the last three decades, emerging stronger every time.
In 2008, what began as a global financial crisis metamorphosed into a global recession, the UAE took diligent steps to ring-fence its economy and financial system from the global down turn. A wide range of fiscal and monetary policy support ensured the business continuity and solvency of business establishments.
Even before COVID-19 was declared a global pandemic, the UAE began implementing a string of pre-emptive measures that included fiscal support through reduced government fees and or waivers of various government charges including rent reliefs and reduced power tariffs.
Massive monetary policy support by the Central Bank of UAE through its Dh256 billion Targeted Economic Support Scheme (TESS) has come as a great relief to individuals and businesses in the form of loan interest deferrals to tide over the financial difficulties caused by COVID-19 related temporary shut downs.
While the economic recovery could be a slow process across the world and in the GCC, the UAE’s greater levels of economic diversification and robust sovereign assets, for sure will better shield its economy compared to many of its global and regional peers.
