June 10, 2020 / 3:31 PM / 2 months ago

UAE economy to contract by 3.6% this year, central bank says

FILE PHOTO: People walk outside Dubai mall after the UAE government eased a curfew and allowed stores to open, following the outbreak of the coronavirus disease (COVID-19) in Dubai, United Arab Emirates May 3, 2020. REUTERS/Abdel Hadi Ramahi/File Photo

DUBAI (Reuters) - The United Arab Emirates (UAE) economy is likely to contract by 3.6% this year after economic activity slowed because of the coronavirus pandemic, the central bank said on Wednesday.

In the first quarter of this year, the UAE economy shrank by 1% year on year, with non-oil gross domestic product down by 3%, as opposed to hydrocarbon GDP, which rose by 3.7% year on year.

“As the drop in economic activity is expected to be followed by sharp contractions in the subsequent quarters, non-energy growth contraction is projected at (minus)-4.1% for 2020,” the central bank said in a first-quarter report.

Hydrocarbon GDP is expected to shrink 2.4% this year, it said.

“While recovery of economic activity is projected to commence in the second half of the year, recovery of economic sentiment will hinge on deploying policy support measures,” it said, referring to stimulus schemes of the central bank and local and federal governments.

The central bank expects employment to drop in the second and third quarters, with a recovery in the last quarter of the year.

Reporting by Davide Barbuscia, editing by Larry King

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