The UAE Central Bank expects an economic contraction of 5.2% in 2020

The Central Bank of the United Arab Emirates expected a deeper economic contraction for the UAE this year than initially expected, due to the disruptions caused by the coronavirus pandemic.

The central bank said, in its quarterly review on Wednesday, that gross domestic product will contract by 5.2% in 2020, compared to a previous forecast of a 3.6% decline.

Gross domestic product fell 7.8% in the last quarter after contracting by 0.8% in the previous three months, he said.

The central bank said, "As a regional center for trade, tourism and transportation, the UAE economy has been affected by the general travel ban, while industrial production has contracted due to supply chain disruptions, limited export opportunities, and a decline in domestic demand."

The forecast is slightly worse than the forecast compiled by Bloomberg, which forecast a decline of 5.1% this year. According to the International Monetary Fund, the UAE economy last contracted by more than 5% in 2009.

Non-oil GDP contracted by 9.3% in the second quarter, compared to a decline of 2.7% in the previous quarter.

In the entire year, the non-oil economy is expected to contract by 4.5% due to the outbreak of the coronavirus.

The forecast assumes an increase in government spending, which will approach 28% in 2020.

In contrast, the UAE central bank expects a recovery in employment.