UAEs Economy shows an expansion curve during 2021 with Central Bank Head Abdulhamid Saeed Alahmadi shown optimism

Within this year in 2021, post the twin shocks of low crude rates as well as Pandemic limitations hit the Arab league’s second-biggest economy UAE, the UAEs core Banking premier UAE Central Bank has showed optimism that the nation’s economy is well in track to bounce back to its development phase.

The Governor Abdulhamid Saeed Alahmadi UAE Central Bank Governor stated that: “Economic activity is still subdued but recovering. The government will continue to diversify the economy, fund infrastructure improvements and encourage private investment.”

On Tuesday in a statement, Abdulhamid M. Saeed Alahmadi also urged and invited the trading as well as banking public for taking part within the “new era to kick start the investment cycle, to expand credit appetites, help customers in need and forge a roadmap which is different from before.”

Based upon the December’s Google COVID-19 Community Mobility report, he further noted that although the economic task quite subdued, there are signs shown by economy that it is back on track with recovery mode and anticipations for this year 2021 are quite optimistic.

As of end-December, there were other positive indicators of the ricochet in activity like the bond and sukuk issuances, and the reappearance of client assurance. The recovery was also authenticated by the upsurge in Purchasing Managers Index (PMI), and the 1.7 percent month-on-month increase in December employment rate, as deputed by the CBUAE Wage Protection System. Real estate sales prices also rejuvenated specifically in terms of assessments and rental yields, he added.

Within the December, the bank anticipated that the overall expansion this year in 2021 will be 2.5 percent. He also stated that: “Utilization of an impetus program of capital and liquidity procedures to aid the economy via the global health crisis has tumbled to about 50 percent of its peak indicating that banks are now progressively coming back to manage their credit books and navigate the way forward.”

Bank Outcomes as well as Dividends

Alahamadi stated that utilization of the Central Bank’s Targeted Economic Support Scheme (TESS) programme, which has now come downcast to about 50 percent from its peak, “is a robust indicator that banks are now slowly coming back to manage their credit books and navigate the way forward. Banks have asked for and the CBUAE has approved in excess of 15 billion dirhams in dividends, based on their agreement with supervisory necessities.”

He further added that while the profit may be slump down for some banks, they are the outcome of a bad year, rather than an essential shift in solvency and the appetite to do business.

“Banks as well as other financial institutions need to go back to the drawing board and redefine their strategies in a new world with redefined geo-political lines; a global economy that is swiftly digitalizing, new trade maps and clients that demand the best services.”

He stated that the financial outcomes of banks for 2020 are heartening and demonstrated the flexibility that the banking system has built over time. The system’s gross assets, deposits and lending have all augmented, although slightly.

The more than adequate levels of capital (18.2 percent, Tier 1 of 17.1 percent) and suitable liquid asset ratio (18.4 percent) in the system, together with sufficient levels of provisioning, depicts that banks and financial institutions in the UAE have displayed sturdiness in the face of the pandemic’s onslaught.”

He stated that while the concluding figures have yet to be established, global GDP, as well as the UAE’s GDP, are expected to be very submissive for 2020 with a shrinkage in the range of 3.5 percent and 6 percent approximately.

The governor further added that: “The speedy pace of vaccination is a great comfort.”

The nation’s investors and financial institutions described “heartening” outcomes the preceding year screening resilience in the banking system, the governor stated. Gross assets, deposits and lending all improved marginally in 2020.

The governor also stated that the central bank has permitted banks’ requirements for more than AED15 billion ($4.2 billion) in dividends, adding that the central bank and the government stand ready to benefit businesses amid the ongoing coronavirus crisis. The International Monetary Fund forecasts the economy to rise 1.3 percent this year after having tight lipped on an estimated 6.6 percent in 2020.

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