The UAE’s gross domestic product grew an annual 2.2 per cent from a year earlier in the first three months of this year as the non-oil sector of the country’s economy continued momentum on the back of government spending, the central bank said.
The non-oil economy grew 1.6 per cent in the three months to the end of March from the same period a year earlier, the banking regulator said in its quarterly economic review.
“[The] aggregate economic growth is rebounding as year-on-year growth is ... underpinned by government spending and picking up [in] private sector demand,” the central bank said in the review. The quarterly Augmented Economic Composite Index of non-oil activities, constructed by the central bank, also "demonstrated growth of the non-hydrocarbon sector in the first quarter of 2019”.
To boost non-oil sector growth, the UAE's federal and emirate governments rolled out stimulus packages in line with UAE Vision 2021. Earlier this year the federal government relaxed foreign ownership requirements and introduced 10-year visas to stimulate the private sector and promote long-term residency.
The government also announced a law allowing foreign investors to own 100 per cent of companies in some sectors. Last year Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, approved a three-year Dh50 billion economic stimulus package, with Dh20bn allocated to the 2019 development package. Dubai's government also introduced initiatives to stimulate growth while reducing costs in key industries such as aviation, property and education.
Last month the central bank revised its overall 2019 economic growth forecast to 2 per cent from 3.5 per cent, as Opec’s third-largest producer reduced output and the global economy continues to slow on the back of trade tension between the US and China. The UAE economy, the Arab world's second largest, accelerated 1.7 per cent last year, the latest central bank data showed.
Oil-GDP growth is expected to come in at 2.7 per cent this year, lower than estimates of 3.7 per cent by the central bank released in March.
However, projections for the UAE’s non-oil GDP, which rose 1.3 per cent in 2018, are to climb 1.8 per cent in 2019 and continue on an upward trajectory in the subsequent years. The central bank had earlier forecast a 3.4 per cent rise in non-oil GDP this year.
During the first quarter of 2019, inflation dropped as the impact of VAT faded and employment in the private sector rebounded, increasing by 1.2 per cent in the period, according to the central bank.
The Financial Soundness Indicators continued to demonstrate the UAE's banking system remained stable during the quarter. Deposits at banks declined slightly due to a drop in the government and government-related entities’ deposits. However, private sector deposits continued to rise in the first quarter of 2019 along with gross credit by the bank for most sectors, the central bank noted.