DUBAI: The cabinet of the United Arab Emirates approved a smaller federal budget for 2021 in a sign that the country is curbing expenditure amid the coronavirus crisis and lower oil prices. The budget for next year was set at 58 billion dirhams ($15.8 billion), state news agency WAM reported yesterday, down from this year's 61.35 billion dirhams, which was the largest budget since the establishment of the country.

"The UAE economy will be among the fastest to recover in 2021, and the government has dealt with the 2020 budget efficiently and has all the tools to continue its financial and operational efficiency in 2021," the Dubai media office said, quoting Dubai's ruler Sheikh Mohammed bin Rashid Al-Maktoum, who is also the UAE's prime minister.

The federal budget accounts for only a fraction of consolidated state spending in the UAE as individual emirates such as Abu Dhabi and Dubai also have their own budgets. It is, however, an indication of official plans for the economy. The planned retrenchment in spending comes amid an economic contraction in the oil-rich Gulf region, bruised by the coronavirus pandemic, lower oil prices and crude production cuts.

Saudi Arabia, the region's largest economy, said in September it plans to cut spending by around 7 percent next year. The International Monetary Fund expects the UAE economy to shrink by 6.6 percent this year and to swing back to a modest growth of 1.3 percent next year.

It estimated the UAE government deficit - including consolidated accounts of the federal government and the emirates of Abu Dhabi, Dubai, and Sharjah - at 9.9 percent of GDP this year, up from a 0.8 percent of GDP deficit in 2019. - Reuters