Ever since the COVID-19 started casting its shadow on the global economy, the UAE federal government, the Central Bank of UAE (CBUAE) and governments of all emirates have been proactive in supporting the businesses in the country.
While the governments have been quick in announcing various fiscal policy measures including lower fees and rent reliefs that directly supported private sector, the CBUAE supplemented the fiscal policy initiatives with robust monetary policy tools. Its Targeted Economic Support Scheme (TESS) made Dh270 billion available to banks that continue to keep banking sector liquid to support business.
Clearly, the proactive stand by the government and the central bank is yielding results with the economic recovery gaining traction across various sectors.
Latest data from the CBUAE shows, the economy began recovering in the third quarter after the waiver of lockdowns in the country and the resumption of international travel. The central bank has forecast the economy to growth by 2.5 per cent in 2021 against a 6 per cent contraction in 2020, pointing to a sharp recovery.
A host of factors such as recovery in international trade, travel and tourism are supportive of the UAE’s growth outlook. The central bank expects economic sentiment to improve in preparation for the Dubai Expo which was postponed to 2021. Better tourism and hospitality data in Abu Dhabi in October show a recovery of occupancy and revenue, the best performance achieved since March 2020, and the improvement is expected to continue further.
The central bank data as at the close of the third quarter showed the government had been fiscally prudent while extending liberal support measures to the private sector. The net operating fiscal balance recorded a surplus at Dh4.2 billion, despite fiscal revenues declining by 41.3 per cent year on year to Dh85.1 billion. Cautions approach to spending saw the overall expenditures declining by 14.4 per cent to Dh80.9 billion.
The banking sector indicators continued to improve as the CBUAE extended its TESS. While the lower interest rates and ample liquidity remain supportive credit growth, resilient growth in deposits by 5.8 per cent and a credit growth of 4.9 per cent, points to healthy financial soundness.
Various fiscal and monetary policy tools used in tandem to fighting a devastating contagion from the pandemic and lower oil prices once again prove the UAE’s ability and willingness to support its economy through appropriate and timely policy tools used in any modern economy.