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IMF upgrades UAE, global economic growth forecast

The International Monetary Fund (IMF) on Tuesday revised upward the UAE and global economic growth forecast for 2021, thanks to massive vaccination efforts as well as $1.9 trillion US stimulus package which will strengthen recovery in the second half of this year.

The IMF Fund more than doubled the UAE’s 2021 growth projection from 1.3 percent in October 2020 to 3.1 percent in its latest World Economic Outlook report released on Tuesday. The fundFund sees the UAE’s growth softening to 2.6 percent next year.

The IMF credited approval of multiple Covidd-19 vaccines that can reduce the severity and frequency of infections for improved outlook of the UAE and global economy. The UAE is now the second most vaccinated country in the world after Israel.

For the Middle East and Central Asia region, the IMF revised upward growth outlook to 3.7 percent for 2021 from 3.0 percent. For the Middle East and North Africa region, itthe Fund revised upward the 2021 growth outlook from 3.2 percent to 4.0 percent.

“We are now projecting a stronger recovery in 2021 and 2022 for the global economy compared to our previous forecast, with growth projected to be 6 percent in 2021 and 4.4 percent in 2022. Nonetheless, the outlook presents daunting challenges related to divergences in the speed of recovery,” said Gita Gopinath, chief economist at IMF. Nonetheless, the outlook presents daunting challenges related to divergences in the speed of recovery. The Fund had projected 5.2 percent growth for global economy for 2021 in its previous forecast released in October 2020.

Business executives optimistic of rebound to pre-covid profitability by 2022

A large majority of business executives surveyed expect the Middle East to be a preferred investment destination that will generate the most growth and opportunities for their company in the next three years.

While 81 percent of Mena executives anticipate growth and investment opportunities in the Middle East, 71 percent of those surveyed expect to see revenues return to pre-pandemic levels by 2022 or earlier and 69 percent anticipate a return to normalised profitability within the same timeframe, according to the latest edition of the EY Global Capital Confidence Barometer (CCB).

Most companies feel satisfied with their performance during the crisis though 90 percent of respondents experienced a decline in revenue due to the Covid-19 pandemic, said CCB report.

Almost all executives (98 percent) conducted a comprehensive strategy and portfolio review, and they plan to focus on investing in customer-centric digital and technology capabilities.

Mergers and acquisitions (M&A) will be the preferred strategic option as companies look to accelerate growth in the post-pandemic world, with 37 percent of Mena companies planning to actively acquire in the next 12 months.

“Mena corporates remain nimble and resilient with executives finding that the current circumstances present a unique time for M&A, with several sectors ripe for consolidation,” said Matthew Benson, EY Mena strategy and transactions leader.

“In 2020, M&A activity was largely led by government-related entities and the transformation of national oil companies Aramco and Adnoc, as well as the investment strategies of ADQ and PIF. This is in line with the general trend toward increase privatization related to key infrastructure assets such as electricity, aviation, and housing. However, there is also a strong pipeline of interesting mid-market opportunities, largely driven by sellers’ needs to raise capital,” said Benson.

About 76 percent of Mena companies plan to increase investments in technology and digital to support their transformations, while 64 percent will focus more on innovation.

When asked about their primary planned M&A activity, 84 percent of Mena respondents said they plan to invest in bolt-on acquisitions – smaller acquisitions in the same sector that will increase market share. In addition, 55 percent of those who plan to acquire are looking for assets domestically rather than internationally, while 94 percent of executives expect greater competition for assets, with much of the competition expected to be from private capital in the Mena region.

The top five investment destinations in the Mena region, including both domestic and cross-border M&A activities, are Saudi Arabia, the UAE, Kuwait, and Oman, with Egypt listed as the fifth destination.

Nasdaq Dubai welcomes listing of $2.5b sustainability sukuk by ISDB

Nasdaq Dubai welcomed the listing of a US$2.5 billion Sustainability Sukuk by Islamic Development Bank (IsDB), the multilateral lender which finances development across its 57 member countries. This is the second AAA-rated Sukuk issuance under the Sustainable Finance Framework of IsDB and is the bank’s biggest US dollar public issuance to date. The 5-year $2.5 billion Trust Certificates were priced at par with a profit rate of 1.262 percent, payable on a semi-annual basis.

Proceeds of the Sukuk will be allocated to finance and refinance green and social development projects that are eligible under IsDB Sustainable Finance Framework.

The first of IsDB’s current Sukuk listings on Nasdaq Dubai was a $1 billion instrument that listed in 2015. With this latest addition, the total value of IsDB Sukuk listed on Nasdaq Dubai is $17.14 billion through 12 tranches.

Dubai gold prices up, 24k rises above dh210 per gram

Gold prices rose in Dubai on Tuesday morning due to the weakening of the dollar as well drop in US Treasury yields.

The retail gold price jumped by one dirham on Tuesday morning, as compared to Monday evening price in line with an increase in global rates of the precious yellow metal.

The 24K retail gold price rose from Dh209.25 on Monday evening to Dh210.25 per gram on Tuesday morning. While 22K, 21K, and 18K prices also increased by Dh1 to Dh197.5, Dh188.5, and Dh161.5 per gram, respectively.

Globally, spot gold price was up 0.3 percent at $1,733.31 per ounce, as of 0117 GMT. Gold futures were up 0.4 percent at $1,735.10 per ounce.

Naeem Aslam, the chief market analyst at Ava Trade, said $1,700 an ounce price level remains as the first resistance, and then the market is likely to see the price moving towards the $1,750 mark in the short term.

The greenback hit an almost two-week low versus a basket of rival currencies, while US Treasury yields also fell because investors paused recent selling of government bonds.

Central bank of UAE issues regulations on the conduct of SMEs

The Central Bank of UAE (CBUAE) on Sunday issued a regulation for small to medium-sized enterprises (SMEs) to promote best practices among licenced financial institutions (LFIs) when engaging with SMEs.

The purpose of the regulation is to improve SMEs’ access to financial products and services. The central bank’s launch of this regulation follows the launch of its new regulatory framework for financial consumer protection.

The regulation seeks to promote a culture within LFIs of dealing with SMEs by defining their obligations when dealing with SME customers. These include setting standards of business and market conduct by LFIs; strengthening the governance and oversight over the design, promotion and sale of financial products and/or services; and promoting responsible financing practices.

“SMEs play an important role in the UAE’s economy. The UAE government has placed great emphasis on developing the SME ecosystem and removing obstacles to a transparent, enterprising and innovative SME sector in the UAE, which has good access to various financial resources,” said Abdulhamid M. Saeed Alahmadi, governor of the Central Bank of the UAE, said.

“The Central Bank of the UAE aims to ensure that SMEs enjoy the highest business standard when interacting with licensed financial institutions, in line with our new consumer protection mandate. We are confident that this regulation will facilitate the provision of best-in-class products and services to SMEs,” said Alahmadi.

UAE in statistics (2020-21)
Overview Last Reference Previous
GDP Annual Growth Rate (percent) 1.6 19-Dec 2
Unemployment Rate (percent) 2.64 19-Dec 2.57
Inflation Rate (percent) -1.86 21-Jan -2.09
Interest Rate (percent) 1.5 21-Feb 1.5
Balance of Trade (AED Million) 274600 19-Dec 299400
Current Account (AED Million) 108900 19-Dec 139000
Current Account to GDP (percent) 7.4 19-Dec 10
Government Debt to GDP (percent) 36.9 20-Dec 27.3
Strong caps, earnings to help UAE banks versus risks

The Covid-19 pandemic, lower oil prices and continued pressure on the real estate sector have increased risks for UAE banks but banking authorities’ response to the crisis reporting requirements have reinforced oversight and transparency, S&P Global Ratings said.

The agency expects rated UAE banks’ asset quality indicators to deteriorate further once regulatory forbearance measures are lifted, although some will be protected by their strong capitalisation and earning capacity.

“Although forbearance measures could be extended from their current mid-year 2021 expiry date, we expect their removal to be gradual and managed. Despite this support, banks with a structural orientation to sectors where prospects remain weakest are expected to book further significant credit losses,” S&P said.

While the message overall points to a higher risk for the banking sector, the positive news is that four of the five banks S&P rate in the UAE — First Abu Dhabi Bank, Abu Dhabi Commercial Bank, Sharjah Islamic Bank and Mashreqbank — are now on stable outlooks, previously negative. The impact was on National Bank of Fujairah, which was downgraded to BBB from BBB+, but now also has a stable outlook.

S&P revised down its assessment of economic risk for the UAE’s banking sector to ‘six’ from ‘five’ and revised its economic and industry risk assessment trends to stable from negative.

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