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UAE Central Bank Starts Gradual Curb of Stimulus Measures

UAE Central Bank Starts Gradual Curb of Stimulus Measures

Thursday, 23 September, 2021 - 15:30
Vehicles stop at a red light in front of the main branch of UAE Central Bank in Abu Dhabi, January 29, 2013. REUTERS/Ben Job

The United Arab Emirates central bank (CBUAE) said on Thursday it was starting to gradually withdraw stimulus measures introduced last year to mitigate the economic impact of the COVID-19 pandemic.

The bank launched a Targeted Economic Support Scheme (TESS) to help banks provide temporary relief to companies and individuals affected by the crisis and boost lending capacity through the relief of existing capital and liquidity buffers.

"In view of the gradual increase in economic activity, the CBUAE is starting a gradual and well-calibrated withdrawal of its Targeted Economic Support Scheme to avoid restricting credit supply and economic growth", it said in a statement.

It said 15% of UAE banks' loan portfolios had benefited from a loan deferral program that is part of the scheme.

The bank will leave unchanged temporarily lowered reserve requirements for banks and the level of the loan-to-value ratio applicable to mortgage loans for first-time home buyers.

It said it was considering extending beyond the end of this year regulatory relief measures that allow banks to maintain lower capital and liquidity buffers, depending on the pace of economic recovery and loan demand.

The UAE economy is expected to grow by 2.1% this year and 4.2% in 2022, the central bank said earlier this week, supported by a recovery in global travel, a pick-up in domestic and external demand, and a successful vaccination drive.

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