UAE economy in 'strong' position and has entered growth phase, minister says

The UAE's economy has passed the recovery phase and is registering growth in key economic indicators, according to the government.

The national economy is in a "strong position" and stands at "high readiness" for the future, the UAE Media Office said in a tweet, citing the UAE Minister of Economy.

The UAE, which approved 33 initiatives in August 2020 to support various sectors during the Covid-19 pandemic, said progress on the three-phase plan is underway.

The first phase of the recovery and economic advancement plan, which provided immediate support to businesses, is 100 per cent complete, the UAE media office said, citing the committee tasked with coordinating and follow up on the implementation of the 33 initiatives.

The second phase, which provides complementary support to sectors to enable a rapid economic recovery, is 50 per cent complete, it said. The third phase will involve "providing integrated support to vital sectors and will open up a sustainable and flexible development path for the economy", according to the Ministry of Economy.

The UAE has spent billions of dirhams in economic stimulus measures to support businesses since the Covid-19 outbreak began last year. Business activity in the non-oil private sectors of the Arab world’s second-biggest economy continued to improve in October, boosted by the easing of Covid-19 restrictions, a rise in tourism and increased spending amid the economic recovery.

The UAE's headline PMI reading climbed to 55.7 in October, from 53.3 in September, underpinning a marked increase in new business during the month, driven by rising spending amid the opening of Expo 2020 Dubai. A reading above 50 indicates economic expansion, while anything below points to a contraction.

The UAE Cabinet, headed by Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, approved the launch of the 33 initiatives to support various economic sectors on August 3, 2020.

It also approved the formation of an interim committee to oversee its implementation, increase growth rates, create a stimulating environment for business, provide new opportunities by developing emerging sectors, harnessing technology, boosting investment in new sectors and enhancing the sustainability and resilience of the national economy, according to state-run news agency Wam.

The UAE economy has bounced back strongly this year, boosted by fiscal and monetary support and other government measures. The stimulus announced by the Central Bank of the UAE included a Dh100 billion ($27.2bn) package and comprised a direct Dh50bn injection of funds through zero-cost collateralised loans. The targeted economic support scheme (Tess) has benefited both individuals and businesses and helped the banks in managing liquidity during the crisis.

Although the CBUAE in September said that it will start a “gradual and well-calibrated withdrawal” of Tess, parts of which have been extended to July 2022, about “95 per cent of banks have surrendered Tess because they no longer need it”, Abdulaziz Al Ghurair, chairman of UAE Banks Federation, said in October.

It is an indication of the economic recovery, as customers are “out of trouble and they don’t need support”, he said.

“It’s a very good sign when the banks voluntarily give up support,” Mr Al Ghurair said. “I don’t think we need any support from the central bank. I think the central bank, the government and the country has done enough to support various parts of the economy.”

The UAE's economy is forecast to grow 2.1 per cent this year, driven by pandemic-mitigation measures, according to the CBUAE's second quarter review. The economy is expected to grow at 4.2 per cent in 2022, higher than the 3.8 per cent previously forecast.

A rapid, mass Covid-19 vaccination programme and widespread testing in the UAE have also boosted economic activity.