The UAE Central Bank governor expects to see a strong return to GDP growth in for the country in 2021 as the government continues to diversify the economy, provide strong infrastructure spending and encourage private investment both as a measure of growth and private employment.
In a statement Tuesday, Abdulhamid M. Saeed Alahmadi invited the business and banking community to take part in this “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.”
He said the good news was that most predictions for 2021 are optimistic and signal a return to growth throughout the year. Economic activity, although subdued, was recovering, based on the December Google COVID-19 Community Mobility Report, he noted.
As of end-December, there were a other positive signals of the rebound in activity like the bond and sukuk issuances, and the return of consumer confidence. The recovery was also validated by the rise in Purchasing Managers Index (PMI), and the 1.7 percent month-on-month increase in December employment rate, as proxied by the CBUAE Wage Protection System. Real estate sales prices also revived specifically in terms of valuations and rental yields, he added.
Bank results & dividends
Alahmadi said the utilisation of the Central Bank’s Targeted Economic Support Scheme (TESS) programme, which has now come down to about 50 percent from its peak, “is a strong indicator that banks are now gradually 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 compliance with supervisory requirements.”
He said the financial results of banks for 2020 are encouraging and show the resilience that the banking system has built over time. The system’s gross assets, deposits and lending have all increased, albeit slightly. The more than adequate levels of capital (18.2 percent, Tier 1 of 17.1 percent) and eligible liquid asset ratio (18.4 percent) in the system, alongside sufficient levels of provisioning, means that banks and financial institutions in the UAE have displayed robustness in the face of the pandemic’s onslaught.”
Whilst profit may be down for some banks, they are the result of a bad year, rather than a fundamental shift in solvency and the appetite to do business, he added.
“Banks and 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 rapidly digitalising, new trade maps and consumers that demand the best services.”
He said that while the final figures have yet to be confirmed, global GDP, as well as the UAE’s GDP, are likely to be very subdued for 2020 with a contraction in the range of 3.5 percent and 6 percent approximately.
(Reporting by Brinda Darasha; editing by Daniel Luiz)
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