Strategy of Development Post Covid-19 In UAE
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.
