Strategy of Development Post Covid-19 In UAE

Strategy of Development Post Covid-19 In UAE
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December 21, 2020

The effect of the outbreak of the Covid 19 virus is strong in the UAE. The tourism industry is the most affected one due to a reduction in global travel. Also, reduced global oil demand had its effect on the revenue side of the economy. The postponement of the 2020 Dubai Expo was also a big concern straining the finances of the UAE. The GDP is expected to contract in 2020 compared to growth in 2019. This is likely to lead to a resetting of many of the ongoing construction projects – especially in Dubai – and to dramatically increase the debt issuance in the UAE. The government tries to guarantee the liquidity of firms and banks. Abu Dhabi, as the richest emirate, would bankroll the UAE economy during the crisis. Hence a forceful rebound of the economy is in the cards for 2021.

The UAE has developed an extremely efficient capacity for testing and tracing across the country, and further lockdown steps are unlikely to be implemented in the UAE without a substantial increase in infection rates. The normalization of ties with Israel is likely to open up business opportunities in the UAE, especially in the tourism, telecommunications, and technology sectors. Due to prevailing conditions and continued home market weakness, UAE consumer prices will fall further in 2020. However, a softer US dollar is likely to generate price pressures on the imports.

Positive Outlook of the UAE:

 

Security: Well-paid security forces, strict selection requirements, a comprehensive civil surveillance network across the emirates, and limited tolerance for religious extremism minimize the possibility of any danger to safety and security in the UAE.

 

Business Environment: In sectors where technology transfer is a priority, the UAE is likely to gradually allow maximum foreign ownership and increased foreign ownership in state-owned companies where corporate governance needs to be strengthened.

 

Tax Benefits: There is no tax regulation other than a 5% value-added tax imposed on 1st January 2018 onwards.

 

Transportation: The UAE has an advanced transport system, and the government is likely to invest further in infrastructure projects to stimulate growth in the country.

 

United Arab Emirates: Key Indicators & Forecasts

Real GDP & Components (%)

2018

2019

2020

2021

2022

2023

2024

Gross Domestic Product

1.2

1.7

-6.8

3.6

2.9

3.7

3.1

Domestic Demand

-2.8

10.3

-5.1

3.8

4.8

4.5

2.9

Export & nonfactor services

11.5

-2.9

-5.8

0.3

4.5

4.5

3.7

Import & nonfactor services

10.9

3.6

-3.7

-0.3

6.9

5.5

3.6

Real per-capita GDP

-0.3

0.2

-7.9

2.5

2.0

2.8

2.3

Source: IHS Markit 2020

Dubai was forced to postpone its 2020 Expo to October 2021 due to the crisis created by Covid 19. This will take up roughly half a percentage point of UAE’s GDP in 2020, which will have a neutral effect on 2021. Planning for the Expo will provide stimulus in 2021, especially for the transport, tourism, and hospitality sectors. UAE will have growth if the number of Covid 19 cases drop with a workable plan of a vaccine in place to battle the pandemic, benefitting from an early lifting of measures against the pandemic. More reforms and projects related to the World Expo in the UAE would help draw higher foreign investment and drive higher growth rates in the medium term. However, this hinges on whether the postponed Expo will take place either in 2021 or 2022.

 

 

 

 

Strategy of Development Post Covid-19 In UAE
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