US think-tank, Institute of International Finance (IIF) has predicted the GPP of UAE to grow as follows; 2.3% in 2021, 3.0% in 2022, 3.4% in 2023 and 3.5% in 2024. The UAE economy’s growth will be faster in the coming three years. An effective range of pandemic containment measures, accommodative monetary policies will contribute to this fast growth as per the IIF.
The Institute of International Finance predicts a decent economic recovery with real GDP growing by 2.3 percent, following a 5.7 percent contract in 2020. Likewise, The Washington DC-based institute predicted three percent growth for the next year, 3.4 percent for 2023, and 3.5 percent a year after.
Garbis Iradian, the chief economist for the Mena region at IFF, said this growth and post-pandemic recovery is to be supported by the partial recovery in domestic demand and an increase in net exports. He also assumes that once the pandemic is contained, oil prices pick up to $52 per barrel in 2021.
He said, “Monetary policies will remain accommodative until the recovery is well-established. The banking system has remained relatively resilient, helped by sound initial capital and liquidity positions and flexible response by the central bank, including regulatory forbearance. Profitability challenges in the low-interest-rate environment may weigh on banks’ ability to expand credit to the private sector.”
With its large financial buffers, spare capacity, and a partial recovery in oil prices, UAE can afford a modest expansionary fiscal stance in 2021. Limiting the fiscal deficit to around 7.3% of GP was greatly aided by re-prioritizing spending on 2020. In 2021 this deficit is expected to fall down to 4.8% of the GDP.
With the current account still in surplus and public foreign assets of $845 billion (an equivalent of 220 percent of GDP), the UAE’s external position remains enviable.
The chief economist also called for significant advancements made in Information and Communication Technology (ICT). The development of a digital legal framework played a huge role in overcoming initial challenges in the wake of the coronavirus pandemic. The World Economic Forum has secured the UAE second rank in ICT adoption, the fourth rank in the digital legal framework, and the sixth rank in the National Information and Communication Technology Index.
He said, “Such progress in digital transformation combined with other structural reforms will help the UAE to diversify the economy further away from oil and boost potential growth,”
The IIF also said that a relatively young population and effective containment measures have greatly helped mitigate the spread of the virus and the number of deaths.
The InsIF reported, “A relatively young population, improved testing, and better treatment of the virus in hospitals have kept the number of deaths in the UAE low,” the Institute of International Finance said in its report on the UAE.
The Washington DC-based body also quoted the UAE authorities and said that the restrictions imposed to contain the pandemic would gradually decrease with time as vaccination will be accessible to more people and continues to improve. After Israel, the UAE’s coronavirus vaccination is the world’s second-fastest to immunize more than fifty percent of the total population and 9 percent by June.