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Due to Covid and low oil prices, UAE economy to shrink 6%

Experts expect UAE’s Gross domestic product (GDP) to contract by 6% during 2020, due to the challenges resulting from facing the Coronavirus pandemic and the drop in global oil prices.

Among the predictions was the UAE Central Bank’s, whose expectations were slightly higher than the International Monetary Fund’s, which expected the contraction rate to exceed 6.5%.

However, the central bank expects that the GDP will record a recovery of more than 2.5% during the next 2021.

Record contraction

The American Bloomberg reported that the UAE economy contracted by more than 5% during the global financial crisis of 2009.

According to the UAE central bank report for the third quarter of the 2020: “As an oil exporter, the UAE is likely to feel the fallout from reduced global demand for oil due to the contraction of economic activities worldwide, including transportation and international travel.”

“Real oil GDP is projected to contract in 2020, corresponding to an average oil production of 2.8 million barrels per day for the year as a whole.”

However, the report indicated that the non-oil GDP is expected to grow by 3.6% for the year 2021, fueled by by increased government fiscal spending, increased credit and employment, as well as stability in the real estate market.

Business market in Abu Dhabi fell for the second month in a row last November in mid-December.

According to a report issued by IHS Markit, the non-oil private sector activity in the UAE has declined over the past month, referring this partly to the first drop in production in May, weak market conditions, and fewer customers.

Covid damage

In terms of PMI, it saw no change from October at 49.5, and remained below 50  which separates growth from contraction.

The UAE economy has been largely affected by the repercussions of the global Coronavirus pandemic.

The Abu Dhabi government has sought to ease restrictions and try to live with the pandemic through new measures to stop the bleeding of financial losses that have continued since the beginning of this year.

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