Emirates: Predicting up to 12 per cent peak-to-trough decline in some GCC economies, the Institute of Chartered Accountants in England & Wales (ICAEW) said the GCC's hospitality and tourism sector, which represents around 15 per cent of its non-oil economy, is not expected to recover until 2023-24.

The chartered accountancy body in a statement issued after a webinar said that despite a boost from next year's Dubai Expo, the region's hospitality and tourism sector would be hard hit due to a slow recovery of mid- and long-haul travel in the wake of the pandemic.

Scott Livermore, the ICAEW's economic advisor and chief economist at Oxford Economics, said at the webinar that the economic slump in the first half of 2020 could potentially be twice as large as the 2008 global financial crisis.

"Nonetheless, the nature of the shock points to a sharper rebound and V-shaped recovery as lockdown restrictions unwind. However, even though the global economy is recovering and will see periods of record growth over the next 18 months, it is unlikely to return to pre-crisis levels until the end of 2021 or early 2022."

In its baseline forecast, the ICAEW assumed that social distancing restrictions would continue to ease through the third quarter of this year and the economic recovery will begin to build, prolonged lockdowns or a second wave of the pandemic, necessitating stringent lockdowns during flu season is a risk. "This could result in a W-shaped recession scenario in which there is a further period of severe economic weakness and a much slower recovery."

The ICAEW noted that GCC markets will recover at a slower pace than other markets around the world, largely because of the region's dependence on hospitality and tourism, and the impact of low oil production. "A flight of expats from the Gulf countries, combined with limited policy support, in the form of smaller fiscal stimulus packages than elsewhere in the world, also risk weighing on the recovery," it added.

"Constrained by low oil prices, the low spending response by GCC governments could result in further GDP losses over the medium term. The GCC governments have an important role in supporting the recovery across the region."

The Institute of International Finance (IIF) predicted a 4.4 contract in the GCC's real GDP, and has said it expects the aggregate fiscal deficit of the six countries to widen from 2.5 per cent in 2019 to 10.3 per cent of GDP in 2020, equivalent to $144 billion, assuming an average Brent price of $40 per barrel.

Michael Armstrong, the ICAEW's regional director for the Middle East, Africa and South Asia, said 2020 is an exceptionally challenging year for global and regional economies, and there is still a great deal of uncertainty.

"Policymakers in the region must now, more than ever, proactively aim to 'build back better' and in a more resilient way, especially given the continued uncertainty in the global oil market. While increasing non-oil revenues is a challenging task in these times, innovation will be vital to the region's economic recovery. Any longer-term growth prospects will dependon higher labour force participation and productivity," he added.