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UAE Expects Exports to Increase by 33% Through Comprehensive Economic Partnership Agreements

The UAE’s Comprehensive Economic Partnership Agreement (CEPA) is expected to increase the UAE’s exports by 33%. (WAM)
The UAE’s Comprehensive Economic Partnership Agreement (CEPA) is expected to increase the UAE’s exports by 33%. (WAM)
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UAE Expects Exports to Increase by 33% Through Comprehensive Economic Partnership Agreements

The UAE’s Comprehensive Economic Partnership Agreement (CEPA) is expected to increase the UAE’s exports by 33%. (WAM)
The UAE’s Comprehensive Economic Partnership Agreement (CEPA) is expected to increase the UAE’s exports by 33%. (WAM)

The UAE’s Comprehensive Economic Partnership Agreement (CEPA) is expected to increase the UAE’s exports by 33%.

The CEPA program is projected to contribute more than AED153 billion ($41.6 billion) to the national GDP by 2031 - representing growth of almost 10 percent in 2022.

According to a recent report, three deals were implemented in 2023, two more signed and awaiting implementation, and four were agreed upon their terms, in addition to a partnership agreement with India - taking the total number of CEPA partners since the launch of the program to 10.

Over the course of a pivotal year for trade, the UAE’s CEPAs with Türkiye, Indonesia, and Israel came into force, removing or reducing tariffs, eliminating trade barriers, and opening up market opportunities for exporters and investors.

In addition, CEPAs were signed with the emerging economies of Cambodia and Georgia, both of which will be implemented in the first half of 2024, while terms were also agreed upon for CEPAs with South Korea, Colombia, Mauritius, and Congo-Brazzaville.

The UAE also commenced CEPA negotiations with a number of other countries, including Serbia, Ukraine, Eurasia, Australia, the Philippines, Malaysia, Costa Rica, Kenya, Chile and Vietnam.

Economic partnership

The UAE's Minister of State for Foreign Trade, Thani al-Zeyoudi, stressed that the year 2023 witnessed a number of achievements within the UAE’s foreign agenda through the CEPA program.

He also noted that the flagship CEPA program has secured access to markets that account for nearly 2 billion people, or a quarter of the world’s population.

“Trade has always been important to the UAE, a bridge that has connected our products, skills and natural resources to the world and infused our economy with its latest ideas and innovations. But, as underlined by the ‘We the UAE 2031’ vision, launched at the end of 2022 by Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, it is now a cornerstone of our economic development and diversification ambitions.”

Al-Zeyoudi also highlighted that, in the first half of 2023, the UAE’s non-oil foreign trade reached an all-time high of AED1.24 trillion ($337 billion), with exports climbing to AED205 billion ($55.8 billion) - another record.

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Dollar Steadies ahead of Trump Inauguration

A teller sorts US dollar banknotes inside the cashier's booth at a forex exchange bureau in downtown Nairobi, Kenya February 16, 2024. REUTERS/Thomas Mukoya/File photo
A teller sorts US dollar banknotes inside the cashier's booth at a forex exchange bureau in downtown Nairobi, Kenya February 16, 2024. REUTERS/Thomas Mukoya/File photo
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Dollar Steadies ahead of Trump Inauguration

A teller sorts US dollar banknotes inside the cashier's booth at a forex exchange bureau in downtown Nairobi, Kenya February 16, 2024. REUTERS/Thomas Mukoya/File photo
A teller sorts US dollar banknotes inside the cashier's booth at a forex exchange bureau in downtown Nairobi, Kenya February 16, 2024. REUTERS/Thomas Mukoya/File photo

The US dollar steadied on Thursday despite the sharp fall in US bond yields after Wednesday’s inflation data as market focus shifted to Donald Trump’s presidential inauguration next week and possible inflationary impact of his policies.

Meanwhile the yen rose against the dollar and the euro as investors expected the Bank of Japan to hike rates next week.

The US dollar index - a measure of the value of the greenback relative to a basket of foreign currencies - was up 0.1% at 109.12.

"Markets are cautious before the inauguration because there is still policy uncertainty," said Paul Mackel, global head of foreign exchange research at HSBC.

"If the risk of US tariffs begins to materialize, the dollar will get another lift," he added, Reuters reported.

The highlight of the day should be the nomination hearing of Trump's choice of Scott Bessent to head the Treasury Department.

Bessent, who will face questioning before the US Senate Finance Committee, is expected to keep a leash on US deficits and to use tariffs as a negotiating tool, mitigating the expected inflationary impact of economic policies expected from the Trump administration.

The US inflation curve "has a well-identifiable 40 bps 'hump' over the next 12 months, which is near-identical to the estimated impact of a 5% universal and 20% China tariff starting as soon as Trump gets in office," said George Saravelos, head of forex research at Deutsche Bank.

"The market is pricing quick but moderate tariffs," he added. "We see risks of slower but bigger tariffs."

Traders who have been growing more worried about inflation responded with relief to Wednesday's US data, buying stocks and sending benchmark 10-year Treasury yields down more than 13 basis points. The currency reaction was more muted.

Analysts flagged that the US consumer price data was better than expected, but still showing inflation above Federal Reserve targets. The figures provided the US bond market with an excuse to do some downside testing for yields, but such a move is unlikely to go far.

"We still think that it will be easy for the Fed to remain on hold for now and wait for more data and fiscal policy clarity," said Allison Boxer, an economist at PIMCO, adding that US data did not change their forecasts for core inflation.

"We expect this to be the message (Fed) Chair (Jerome) Powell aims to communicate at the January meeting."

There was little direct reaction in foreign exchange markets to the ceasefire deal in Gaza, though the Israeli shekel did touch a one-month high on Wednesday.

The yen rose 0.46% against the dollar, after hitting 155.21, its lowest level since Dec. 19. It was up 0.51% against the euro at 160.19.

Recent remarks from Bank of Japan Governor Kazuo Ueda and his deputy Ryozo Himino have made clear that a hike will at least be discussed at next week's policy meeting and markets see about a 79% chance of a 25 basis point increase, while pricing 50 bps of rate hikes by year-end.

"Yen strengthened on expectations for a rate hike, but now the focus is on what BOJ officials will say about the monetary policy outlook," HSBC's Mackel argued.

"They could signal a more gradual path for the future, which could limit yen gains."

Japan's annual wholesale inflation held steady at 3.8% in December on stubbornly high food costs, data showed on Thursday.

"Expectations of a BOJ hike and perhaps fears of more forex intervention in the 158/160 area have helped the yen outperform," said Chris Turner, head of forex strategy at ING.

"We expect that to continue into next week's BOJ meeting. However, dips may exhaust in the 153/155 area," he said.

The euro was up 0.05% at $1.0294.

Sterling dropped sharply against the yen and also weakened versus the dollar and the euro on Thursday as investors focused on monetary policy divergence after last week's selloff in gilts and the pound.

China's yuan, seen on the front lines of tariff risk, was pinned near the weak end of its trading band at 7.3468 throughout the Asia session.