Economy notably contracts in Q2 on non-oil sector downturn
According to preliminary data released by the Central Bank of the UAE, GDP dropped 7.8% in year-on-year terms in the second quarter, notably down from the first quarter’s 0.8% contraction. Q2’s result marked the second quarterly contraction since December 2017, and the worst downturn on record.
Although corroborating data from the UAE’s Federal Competitiveness and Statistics Authority is yet to be released, the Central Bank estimates a 9.3% year-on-year dive in the non-hydrocarbon sector (Q1: -2.7% yoy), making it the key driver behind Q2’s sharp GDP contraction. Q2’s drop is a direct consequence of the lockdown measures imposed in March to contain the spread of the pandemic, as many activities were halted in the period.
Meanwhile, the Central Bank did not provide estimates for the hydrocarbon sector in Q2, although it did release data for oil output, which fell by 4.1% in Q2, swinging from Q1’s 3.7% increase following the production cuts agreed under OPEC+. Looking forward, oil prices are expected to continue to pick up, as supply is reduced and global demand starts to recover on the back of reopening economies.
The Central Bank provided updated estimates for the current year, projecting the economy to drop 5.2% in annual terms and non-energy GDP to contract 4.5% in 2020, based on its assessment of the impact of the pandemic on the economy and economic sentiment. Moreover, a rise in the unemployment rate is set to drag on private consumption.
UAE Private Consumption (ann. var. %) Data
|Private Consumption (ann. var. %)||9.4||6.1||10.0||-12.5||-|