UAE GDP projected to grow by 2.4% in 2021, 3.8% in 2022

*Non-oil GDP to expand by about 4 percent in both years

*Central Bank report finds TES Scheme helped distressed individuals, companies to overcome debt difficulties

The UAE GDP is expected to grow by 2.4 percent in 2021 and 3.8 percent in 2022 while the non-oil GDP to expand by around 4 percent in both years, according to the Financial Stability Report (FSR) released by the Central Bank of the UAE (CBUAE).

The CBUAE has published its FSR for the year 2020, featuring key solvency and liquidity indicators that demonstrate the resiliency of the UAE’s financial system amid the COVID-19 pandemic.

The report gives a comprehensive overview of the development of the UAE economy and financial system in 2020. CBUAE projects that the UAE economy is expected to gradually recover during 2021 and 2022 from the repercussions of the COVID-19 pandemic. 

As per CBUAE’s findings, the Targeted Economic Support Scheme has been effective in mitigating the risks posed by the pandemic by ensuring a continued flow of credit and helping affected individuals and companies to overcome temporary debt repayment difficulties.

During 2020, the CBUAE closely monitored the developments in the banking sector, especially asset quality and the growth of lending. 

The report demonstrates that the UAE banking sector remains resilient, with sustained lending capacity. The effects of the pandemic resulted in banks’ higher impairment charges, lower operating income and reduced profitability. The aggregate capital and liquidity buffers remain well above the regulatory requirements.

Also, CBUAE conducted frequent top-down solvency and liquidity stress tests by using several hypothetical adverse scenarios at different stages of the COVID-19 crisis. The stress testing results indicated that the UAE banking system has solid capital and liquidity buffers to withstand the significant hypothetical shocks. 

A separate section of the report is devoted to climate risk, which is at the forefront of regulatory focus both globally and in the UAE. The FSR underlines that it is important for the UAE banks to consider integrating climate change risk into their lending and operational processes.

Detailed information about payment systems operated by the CBUAE is also featured in the report, as well as the benefits and risks posed by new technologies and cyber-security. The report highlights the importance of adequate management of risks associated with new technologies and increased competition from innovative market entrants. Continued focus on those risks is important as the UAE strengthens its role as the largest FinTech hub in the Middle East.

Commenting on the findings of the report, Khaled Mohamed Balama, Governor of the Central Bank of the UAE, said: “In line with the UAE’s robust mitigation measures, including a swift rollout of COVID-19 vaccines, CBUAE has worked tirelessly to ensure that vital sectors of the nation’s economy can withstand this crisis.”