Mon. Jun 24th, 2019

Central Bank of UAE is the cause of the determent in the Growth, but there’s more

Last week the Central Bank of the UAE surprised economics analysts with a big downgrade of its forecasts for growth in gross domestic product (GDP) for the current year.
Just three months ago, the bank — the main instrument of monetary and fiscal policy in the Emirates as well as its most authoritative economic statistician — laid out a bullish projection for the national economy in 2019.
The bank’s annual report added some flesh to the non-oil weakness. There was some good news. The important wholesale and retail sector grew, as did construction. The small agricultural sector nearly doubled its growth in 2018, and “administrative and support service activities” returned to positive growth, as did “professional, scientific and technical activities.”
But the rest of the non-oil sectors, including big economic generators like utilities, transportation, finance and insurance, and real estate — either fell significantly or were flat. Manufacturing and “accommodation and food services activities” — high-profile parts of the diversification plan — more than halved last year.
The government of the UAE is well aware of the challenges and has already taken action. There is a 50 billion dirham ($13.6 billion) economic stimulus package in place in the capital, Abu Dhabi; in Dubai, policymakers have announced a raft of measures to reduce the cost of doing business and encourage long-term investment. A new law designed to attract foreign direct investment has been in place since the beginning of 2019.
The impact from these initiatives could come through as early as next month, the IMF told Arab News. “As suggested in our May press release, our growth forecast for 2019 is broadly in line with the Central Bank’s. Growth is indeed likely to be lower than we forecast in the April world economic outlook, but we’re now seeing something of a turnaround and expect a pickup in growth in 2020-21. These updates will be reflected in our July update,” the fund said in a statement.