The Central Bank of the UAE (CBUAE) said on Thursday that the country’s economy will grow by 2.4 percent this year and by 3.8 percent in 2022.
Its latest Financial Stability Report for the year 2020 uses key solvency and liquidity indicators to demonstrate the resiliency of the UAE’s financial system amid the Covid-19 pandemic.
CBUAE said it projects that the UAE economy is expected to gradually recover during 2021 and 2022 from the repercussions of the pandemic.
It added that the non-oil GDP is set to expand by around 4 percent both this year and next.
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 amid the ongoing coronavirus crisis.
CBUAE also said that the UAE banking sector remains resilient, with sustained lending capacity even though 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, it added.
Stress testing results indicated that the UAE banking system has solid capital and liquidity buffers to withstand future shocks while the report noted that it is important for UAE banks to consider integrating climate change risk into their lending and operational processes.
Khaled Mohamed Balama, governor of CBUAE, 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 are able to withstand this crisis.
“CBUAE’s introduction of the Targeted Economic Support Scheme came at the right time, ensuring that banks could mitigate funding and liquidity pressures and maintain their lending capacity, resulting in the provision of necessary aid to individuals and corporates alike. Our support is ongoing as most support measures provided by CBUAE will remain in place through 2021.
“Together with the UAE financial sector, we pave the way for gradual economic recovery and remain vigilant towards the challenges ahead, as we continue to uphold the UAE’s financial and monetary stability.”
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