UAE economy collapsing… Record rates of deflation slowdown

The UAE economy crisis is escalating in light of record levels of deflation and slow growth due to the failure of the country’s ruling regime and the impact of the emerging Coronavirus crisis.

According to the expectations of the World Bank, the UAE economy is expected to shrink by 4.3 percent, amid estimates that the Coronavirus crisis contributed to a slowdown in the activities of the non-oil private sector further, while he was suffering mainly before the crisis to reach the companies’ conditions to the lowest level ever.

Experts estimated the losses of the UAE economy in the light of the Coronavirus crisis at about $52 billion, due to the decline in gross domestic product, the stoppage of business, the collapse of oil prices, the losses of Dubai that depend on tourism, real estate trade, logistics, export and investment sectors in light of declining levels of global and local confidence.

According to a recent report by Moody’s, the global credit rating agency, the indirect impact of the Coronavirus pandemic on global growth and international trade is a major shock to economic growth in the UAE.

Moody’s expected the UAE to suffer from a severe contraction, and confirmed that the debts of entities associated with the Dubai government are still more vulnerable due to its holdings in the real estate, transportation and tourism sectors.

Before that, the UAE Central Bank expected the country’s economy to shrink 3.6 percent this year, after economic activity slowed due to the Coronavirus pandemic, compared to a growth of 1.7 percent the previous year.

This comes under pressure from the general slowdown in the main activities due to the precautionary measures against the COVID-19 and the failure of the UAE government policies to limit the escalation of the economic meltdown.

The CBE stated in the quarterly report that estimates indicate a decrease in non-oil GDP by 4.1% this year, amid slowing credit and employment growth, low economic sentiment and a decline in real estate prices.

He pointed out that estimates indicate that the UAE’s GDP shrank by 1% during the first quarter, compared to a growth of 0.8% in the fourth quarter of last year.

He added that “the restrictions imposed by the state to control the outbreak of Coronavirus, had an impact on local economic activities, tourism and consumption.”

According to the report, it is estimated that non-oil GDP decreased by 3% in the first quarter of the year, after a recovery in the fourth quarter of last year by 4.4%.

The contraction will be more severe in the second quarter on an annual basis than this year, and then subside in the third quarter with the assumption that the implications of the virus will be contained.

The report suggested that real estate prices decline in the second and third quarters before returning somewhat in the fourth quarter of the year.

At the level of the oil sector, the central bank expected it to shrink by 2.4% during 2020, compared to its growth by 3.4% last year.

The report attributed the contraction of the oil sector to adhering to the (OPEC +) agreement to reduce production by about 9.7 million barrels, as well as oil prices that will remain low throughout the year due to a sharp drop in global demand.

The report also expected the recovery of economic activity to start in the second half of the year, but the recovery of economic sentiment will depend on the support measures, according to what the central bank said, referring to stimulus programs from the central bank itself and the UAE and federal governments.

The central bank expects employment activity to decrease in the second and third quarters, and then recover in the fourth quarter of the year.