The UAE economy should see its growth solidifying in the second half of 2021, but the first half of the year will be “choppy” as the vaccine rollout gathers pace around the globe, experts at global consultant PwC told Zawya in an interview.
Giving his view on the likelihood of improved growth in the UAE as the world attempts to recover from COVID-19, Richard Boxshall, Senior Economist at PwC Middle East said the biggest test for growth will arrive in the fourth quarter when Dubai Expo 2020, which was delayed for a year by the pandemic, will be the focus.
“With vaccines, mass testing and our modified social behaviours we are all better prepared to deal with COVID-19 in 2021,” said Boxshall.
“All signs point to 2021 being a return to growth for the UAE, with the median real GDP growth for the Gulf region expected to be 3.0 percent.
“The biggest test for growth, however, will be in the fourth quarter as all eyes turn to Dubai for Expo 2020.”
Nicolas Mayer, Global Leader Tourism & Hospitality, said the expo is a key event not just for the UAE but as an indicator of the global recovery from the pandemic.
“If by October 2021 the global pandemic situation will have further improved, which is a realistic scenario, then Expo 2020 will be one of the first and most important events globally to reconnect the world, digitally and physically,” he said.
“I believe it will be the seminal global event to kick off the post-pandemic tourism ecosystem, especially if participating countries and organisations will present content and experiences that allow the visitors to reflect on the shape of our world and their lives in the post pandemic world,” he added.
For Boxshall, the first half of 2021 is likely to be uneven as countries grapple with the logistical challenges of mass vaccination programmes.
“The first three to six months are likely to be choppy, as we wait for the vaccine to be fully rolled out and we deal with changing global restrictions due to the evolving nature of the virus.
“But economic growth in the second half of the year should be on a solid basis. And while I expect most sectors to grow in 2021, the speed of growth will be uneven across different economic sectors. For example, I expect the tourism, hospitality, and aviation sectors across the Middle East to see strong year-over-year top-line growth given the extent of demand destruction in 2020.”
Recent changes to UAE laws on residency – allowing longer term visas of up to 10 years for highly qualified or talented individuals, and the relaxation of foreign ownership laws, have brought about a change in perspective for investors into the country.
“These amendments now make it possible for investors to take a longer-term perspective,” said Boxshall.
“More broadly, I anticipate a wave of policy innovations as the governments of the UAE look to reboot the economy for the post-COVID-19 era,” he added.
In the short-term, foreign direct investment (FDI) into the country may be impacted, Boxshall said, adding, but it will balance in the medium term.
“The absolute amounts of investment may be smaller in the short term when compared to the time period prior to the dual shock of the COVID-19 pandemic and the oil market disruptions, but the business environment in the UAE has been continually improving and continues to be attractive to investors as they look to develop a foothold in a growing region and to skilled workers over the medium term,” he said.
The impact on the UAE’s tourism market has been much discussed, particularly as Dubai opened its borders to tourists during the winter holidays, while other markets remained closed to visitors.
For Mayer, the recovery of the UAE’s tourism market will depend on how quickly tourism and source markets build their trust in each other, particularly when it comes to approaches to vaccination.
“That trust would of course be strengthened by positive results in vaccination campaigns, but it also depends on the ability of national authorities to align with agility, and on the private sector to work together positively and transparently towards rebuilding trust in commercial relations,” he said.
“I am encouraged to see that in the GCC region both the authorities and the private sector have been amongst the most agile and proactive globally, and that therefore our region should be amongst those destinations benefitting the fastest from the expected upswing.
“We do however need to remember that many of the important source markets of UAE tourism are in regions where the vaccine response is not as far progressed as, for example, in Europe, and that therefore the UAE visitor numbers from these origin markets may continue to experience a lag in 2021.”
There will be ‘sporadic and regional’ setbacks in the tourism recovery, said Mayer, but the UAE is protected to a degree as its base of visitors is diverse.
(Reporting by Imogen Lillywhite; editing by Seban Scaria)
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