UAE Central Bank expects recovery of economic activity in H2 2020

The Central Bank of the UAE (CBUAE) has projected the recovery of economic activity to commence in the second half of the year.

The first quarter economic activities witnessed mixed movements, with the UAE economy performing well during the first two months of 2020.

The bank affirmed - in the Quarterly Economic Review 2020 published on Wednesday - that the Targeted Economic Support Scheme, TESS, by the CBUAE and the economic stimulus packages announced by both local and federal governments are likely to weigh in positively on the PMI, real estate prices, employment and credit growth with a positive impact on the overall sentiment.

In line with the agreement by Opec+, the UAE average oil production is projected at 2.984 million barrels per day in 2020.

The report also showed that the UAE labour market witnessed activity as employment, measured by permit holders, in the private sector increased by 1.3 per cent and 2.0 per cent quarter-on-quarter and year-on-year respectively, in Q1 2020, compared to an increase of 0.3 per cent and 2.0 per cent, respectively, in the previous quarter.

Jobs in the private sector reached 5.159 million employees or 64,000 new positions added in the first three months of 2020.

In 2019, private sector jobs have been growing in line with the non-hydrocarbon GDP, being correlated at 70 per cent in the most recent period.

The real estate and business services sector and other sectors increased jobs year-on-year in Q1 2020 by 7.1 per cent and 11.3 per cent, faster than the 6.3 per cent and 10.5 per cent in the previous quarter, respectively.

Also, employment in the manufacturing sector, which constitutes around 9.2 per cent of total employment in the private sector, continued to grow at the same rate on a year-on-year basis in Q1 2020, as in the previous quarter, at 1.3 per cent. In addition, the Transport, Storage and Communication Sector, which has the lowest share of private sector employment of 6.9 per cent, increased employment by 0.9 per cent year-on-year.

In Q1 2020, the UAE dirham appreciated in nominal terms on a Y-o-Y and Q-o-Q, due to the appreciation of the US dollar, according to the UAE Central Bank Quarterly Economic Review.

The report for the first quarter 2020 said against the currencies of the top-10 non-dollarized import partners, the UAE currency appreciated by 0.1 per cent Q-o-Q and by 1.2 per cent Y-o-Y.

‘’Against the currencies of the top-10 non-dollarized non-oil export partners, the appreciation was of 0.4 per cent Q-o-Q and of 0.9 per cent Y-o-Y, ‘’ the report added.

‘’Accounting for all of the UAE’s trading partners, the Nominal Effective Exchange Rate, NEER, displayed the same pattern of appreciation relative to a basket of the weighted average of the currencies of major trading partners,” it continued.

“In particular,” the Quarterly Economic Review noted, “the average NEER appreciated by 0.5 per cent and 2.4 per cent Q-o-Q and Y-o-Y, respectively, in the first quarter of 2020, compared to an appreciation of 0.1 per cent and 0.8 per cent, respectively, in the previous quarter.” Meanwhile, outward personal remittances during Q1 2020, outward personal remittances increased by 7.8 per cent or Dhs3 billion from Dhs38.4 billion to Dhs 41.4 billion compared to the same period of 2019, according to official figures released by the UAE Central Bank today. ‘’The outward personal remittances that were settled through the banks increased by 16.9 per cent or Dhs1.4 billion. Meanwhile, the outward personal remittances that were settled through the exchange houses registered an increase of 5.4 per cent or Dhs1.6 billion, compared to the same period of 2019,’’ said the CBUAE Quarterly Economic Review.

The figures, including monthly data through March, provide evidence that, COVID-19 outbreak, did not affect the volume of personal funds transferred by expats and UAE nationals abroad thus far in the first quarter of 2020, the report noted.

The top five destination countries for outward personal remittances during January-March 2020 were India (37.8 per cent), Pakistan (11.4 per cent), Philippines (7.0 per cent), Egypt (6.6 per cent), and the USA (3.6 per cent). With the exception of Philippines, which in contrast saw a decrease by 3.6 per cent, outward personal remittances to these countries increased by 20.8 per cent (Pakistan), 18.7 per cent (Egypt), 15.2 per cent (USA), and 9.1 per cent (India).

Meanwhile, to achieve higher financial inclusion and as part of its strategic objectives, the Central Bank of the UAE, CBUAE, has conducted a survey of 5,134 resident individuals, aged 15 years and above across the seven Emirates in the UAE, including students and low and mid-income individuals.

The survey reveals that 85 per cent of adults, aged 15 years and above, are users of at least one formal financial service, while 15 per cent have no access to formal financial services, or in other words “financially excluded”.

The survey aimed to gather inputs to enable the CBUAE to design and implement a comprehensive strategy to increase the degree of financial inclusion in the UAE. The survey collected information from individuals on their access to formal financial services that are deemed essential enablers to improve their livelihood, such as access to bank account, access to formal credit, access to insurance services, and access and use of money transfer services (remittances).

WAM