UAE’s projected recovery likely to help its GDP grow 2.5 pc in 2021
ABU DHABI/December 30-2020: Despite the COVID 19 dampener and its attendant impact on the country’s revenues, the UAE recorded a surplus net operating balance of AED4.2 billion in Q2 2020 ending June 30, compared with an AED 12.9 billion surplus in the previous quarter.
This was primarily possible due to a 14.4 per cent year-on-year decline in expenditure compared with a much larger decline of 24.4 per cent in the previous quarter.
While the revenues registered a decline in Q2, 2020 by 41.3 per cent Y-o-Y to AED85.1 billion as a result of the decline in tax and other revenues, the expenditures declined by 14.4 per ent to AED80.9 billion leaving a AED4.2 billion surplus.
UAE’s GDP set to recover in 2021
Central Bank of UAE, in its Quarterly Economic Review, says UAE’s Real GDP is projected to recover to 2.5 per cent in 2021, with non-oil GDP growing by 3.6 per cent and oil GDP remaining flat following OPEC+ production schedule.
Real non-oil GDP growth is expected to be driven by increasing fiscal spending, pick up in credit and employment, relative stabilisation of the real estate market, boosted by recovery in confidence and the Dubai EXPO 2021
Better tourism and hospitality data in Abu Dhabi in October shows a recovery of occupancy and revenue, the best performance achieved since March 2020, and the improvement is expected to continue further.
China, the lone gainer this fiscal
However, China is expected to achieve a positive growth of 1.9 per cent, being the only large economy in the world to do so in the current year..
Taxes fall 59 pc in Q2
The revenues registered a much steeper decline in Q2 2020 by 41.3 per cent Y-o-Y to AED85.1 billion as a result of the decline in tax and other revenues.
Taxes fell by 31 per cent and 59.1 per cent Y-o-Y in Q1 and Q2, respectively. In the first quarter of the year, the collected taxes amounted to AED29.2 billion compared with AED29.5 billion in the second quarter.
VAT pushes up Saudi inflation
All GCC countries, except Saudi Arabia and Kuwait, experienced negative inflation due to subdued economic activities, and as is the case in the UAE, falling housing and energy prices were the main drivers.
Saudi Arabia’s annual inflation rate increased from 0.5 per cent in Q2 to 6.2 per cent in Q3, mainly due to the tripling of the value-added tax (VAT) rate from 5 per cent to 15 per cent in July and an increase in some customs duties.
According to recent data from Dubai Land Department (DLD), residential property prices in Dubai declined on average by 0.9 per cent Y-o-Y in Q3 2020. Meanwhile, rents in Dubai continued their decline, decreasing by 6.9 per cent Y-o-Y in the third quarter.
However, according to the REIDIN7 house price index, average price in the Abu Dhabi housing market, increased Q-o-Q by 0.9 per cent in Q3 2020. Although prices showed quarterly improvement, this was not enough to offset the negative momentum in earlier quarters, leading to an annual decline by 5.5 per cent.