Economic activity in the UAE, which recovered significantly from the coronavirus-induced slowdown in 2021, is expected to continue improving this year despite global headwinds, the UAE Central Bank said.
The regulator “projects a positive outlook for the UAE’s economy and financial system in 2022", Central Bank Governor Khaled Balama said in its latest Financial Stability Report.
“The global macro-financial outlook, however, will be negatively affected by supply chain disruptions, rising inflationary pressures and further escalating geopolitical tensions.”
The Central Bank expects the UAE economy to post its strongest annual expansion since 2011 this year after it grew by 8.2 per cent in the first three months of this year on higher oil prices and measures to mitigate the impact of the Covid-19 pandemic.
The various fiscal support measures taken by the UAE government during the pandemic were instrumental in protecting the stability of the economy and the financial system, the regulator said.
The UAE introduced an economic stimulus package worth Dh388 billion ($105.65bn) since the pandemic tipped the world economy into its worst recession since the 1930s.
“As part of the UAE’s overarching efforts, the Central Bank launched the Targeted Economic Support Scheme [Tess] in March 2020. These support measures safeguarded the UAE’s financial system and supported the resilience of the country’s economy,” Mr Balama said.
The Tess programme was aimed at boosting liquidity in the financial and banking sector.
As the outlook improved, the regulator announced a gradual Tess exit strategy, with the first phase completed by the end of 2021 and the second phase concluded by the end of June 2022.
The Central Bank will maintain the final phase of Tess measures during the second half of 2022, it said in the report.
Support measures that temporarily remain in place include reduced reserve requirements, lower down payments for new mortgage loans and the prudential filter.
The Central Bank is “closely monitoring the evolving situation globally and stands ready to take additional measures if necessary”, it said.
These support measures safeguarded the UAE’s financial system and supported the resilience of the country’s economy
Khaled Balama,
governor of the Central Bank of the UAE
The UAE, the Arab world’s second-largest economy, is expected to grow by 5.4 per cent and 4.2 per cent in 2022 and 2023, respectively, according to the latest projections by the Central Bank.
The International Monetary Fund projects that the UAE economy will grow 4.2 per cent this year while Emirates NBD forecasts growth of 5.7 per cent and Abu Dhabi Commercial Bank expects a 6 per cent expansion, supported by a sharp rise in the oil sector.
There is a probability of even stronger growth this year as a result of higher oil output, rising crude prices and government initiatives to double the size of the manufacturing sector by 2031, the Central Bank said.
Oil prices rose this year after Russia’s military offensive in Ukraine began in February.
Brent, the key benchmark for two thirds of the world's oil, closed in on $140 in March before losing some of those gains on fears of slowing demand. However, prices remain between $95 and $100 a barrel.
The UAE banking system demonstrated resilience in weathering the pandemic’s repercussions while also having a supportive role in providing relief to affected households and businesses.
The Financial Stability Report 2021
The Central Bank's latest report also highlighted the recovery of the nation’s banking system and the broader financial system to pre-pandemic levels.
“The UAE banking system demonstrated resilience in weathering the pandemic’s repercussions while also having a supportive role in providing relief to affected households and businesses,” the report said.
Banks maintained adequate capital and liquidity buffers while profitability rebounded towards pre-pandemic levels in 2021 as the economic recovery started to gain traction.
“Lending growth rebounded in the second half of 2021 as business activities started to recover and pandemic containment measures were gradually lifted. The credit demand outlook is likely to improve in 2022, along with the recovery of global and domestic economies,” the report said.
The report also outlined some of the key risks for the banking system, which stem from the potential deterioration of asset quality and insufficient change in the business model of banks, in light of rapid digitisation, climate change and rising governance requirements.
While the credit risk outlook has improved in the UAE, as reflected in the positive rating revision of most UAE banks by credit rating agencies, lenders should identify long-term asset quality concerns and make adequate provisions, the regulator said.
The Central Bank’s approach focuses on “identifying and mitigating potential systemic risks” and protecting the stability and resilience of the UAE financial sector, Mr Balama said.
The regulator said it continues to analyse evolving risks in the financial system, including environmental, social and governance risks, as well as the financial implications of geopolitical tension, compliance in the fight against money laundering and the financing of terrorism and elevated cyber risks.
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More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
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Rating: 4.5/5
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
MATCH INFO
Karnataka Tuskers 110-5 (10 ovs)
Tharanga 48, Shafiq 34, Rampaul 2-16
Delhi Bulls 91-8 (10 ovs)
Mathews 31, Rimmington 3-28
Karnataka Tuskers win by 19 runs
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MATCH INFO
Pakistan 106-8 (20 ovs)
Iftikhar 45, Richardson 3-18
Australia 109-0 (11.5 ovs)
Warner 48 no, Finch 52 no
Australia win series 2-0
