CBUAE’s robust policy framework supports financial stability: Mansour bin Zayed

ABU DHABI / WAM

The Central Bank of the UAE (CBUAE)’s robust policy framework provided the foundation to achieve the targeted economic outcomes for the country, as the UAE recorded an estimated GDP growth of 7.6% in 2022, affirmed His Highness Sheikh Mansour bin Zayed Al Nahyan, Vice President, Deputy Prime Minister, Minister of the Presidential Court, and Chairman of the Board of Directors of the CBUAE.
‘’Despite the global trend, inflation in the UAE remained significantly below the 8.8% international average. This was in part due to the CBUAE’s decision to align with the strategy of the Federal Reserve System and raise the policy interest rate to 4.4%, as well as the exchange rate appreciation of the Dirham. Furthermore, the credit rating of the country remained high at Aa2 and AAby Moody’s and Fitch respectively, public debt level was low at 40% of GDP and credit continued to flow to both corporate and household sectors at a rate that was supportive of economic growth, said His Highness Sheikh Mansour bin Zaye in a message in the CBUAE 2022 Annual Report.
The 2022 Annual Report of the CBUAE highlights continued efforts to maintain monetary and financial stability, regulate and supervise financial institutions, ensure smooth operation of cash and electronic payments infrastructure, increase focus on Anti Money Laundering and Countering the Financing of Terrorism (AML/CFT), and protect consumers of financial services.
In 2022, His Highness Sheikh Mansour noted, the UAE was able to overcome the challenges brought on by the COVID-19 pandemic as widespread vaccination campaigns improved immunity. With the return of global trade activity, most developed and developing countries experienced a marked increase in inflation to levels that far exceeded inflation targets set in most advanced economies.
‘’At a macro-economic level, inflationary drivers were observed following the easing of pandemic-induced lockdowns, such as the strong rebound in aggregate consumer and business demand, disruptions in global supply chains and tighter labour markets. These drivers were amplified by increased global geopolitical tensions, which have also materially contributed to historically high prices for oil, gas and other key commodities. Our most recent assessment is that the risk of the global economy facing a recession in the near term remains live, whilst medium term prospects remain significantly uncertain.”
‘’Against the backdrop of these global macroeconomic and geopolitical uncertainties, the CBUAE continued to implement coherent policy within its independent macro-prudential, monetary policy and regulatory mandate. The design of these policy decisions took due account of the UAE Government’s strategic roadmap to sustain the competitiveness of the country, ensure high economic growth and achieve full employment of UAE nationals,” he added.
In its capacity as the macro-prudential authority for the UAE, Sheikh Mansour said, the CBUAE terminated most temporary support measures aimed at helping the country cope with the COVID-19 pandemic, a decision that reflected the banking system’s return to prepandemic levels of financial strength. My assessment is that 2022 demonstrated the CBUAE’s vigilance to unprecedented macroeconomic challenges and emerging risks whilst its proactive responses supported economic stability and the dynamism of the economy.
‘’ Looking ahead to 2023 and beyond, I would like to highlight two strategic priorities for the CBUAE that are also at the top of the agenda for governments, central banks and policymakers globally. Firstly, the CBUAE will begin a digital transformation programme which aims to significantly enhance financial infrastructure within the CBUAE and the country. Secondly, the CBUAE will contribute to the UAE’s wider policy initiatives as part of the UAE hosting COP28. In particular, the CBUAE will continue to take the necessary steps to ensure the integration of climate risks and facilitation of sustainable finance in the regulatory framework of the financial sector. It will also look to adopt aspects of ESG principles in its own investment policies and processes in the medium term.
‘’On behalf of the Board of the CBUAE, I would like to take this opportunity to express my gratitude to our management and staff, and all our stakeholders for their support and commitment to our vision to shape the CBUAE into a best-in-class central bank. The CBUAE has made a clear progress towards this ambitious goal in 2022, and I am convinced that it will remain steadfast in its pursuit of excellence in order to ensure a resilient financial system and contribute to the continued prosperity of the UAE,” said His Highness Sheikh Mansour bin Zayed in conclusion.