KHALEEJ TIMES, Wednesday, Jan 20, 2021 | Jamadi Al Thani 7, 1442
UAE looks set for V-shaped economic recovery in 2021
Emirates:
The UAE economy is expected a V-shaped recovery this year due to strong
rebound in tourism and oil prices as well as its strong links to emerging
markets that will help return to the growth path, says a latest report.
Global Investment Outlook report released by First Abu Dhabi Bank (FAB) said the
national economy should grow by around 2.5 per cent overall and 3.6 per cent for
non-oil sectors this year as the economy emerges from Covid-19 pandemic and
recorded a steep increase in economic activity.
Referring to the Central Bank of the UAE data, the report titled as ‘Paving the
path for our investors to grow stronger’, said the UAE economy shrank by around
six per cent in 2020 and five per cent for non-oil sector.
FAB’s predictions for the UAE include signs of an imminent improvement for
incoming tourism, as pent-up travel demand and the country’s successful
management of the Covid-19 virus converge to make the UAE a potentially top
destination this year.
“The Dubai Expo’s rescheduling to open in October 2021 will add further
strength, and an improvement in tourism will have a positive effect on other
sectors, including retail and real estate activity, as the Covid-19 immunisation
programme moves forward,” according to the report.
Hana Al Rostamani, deputy group CEO and head of personal banking at FAB, said
Abu Dhabi and the UAE have worked tirelessly during 2020, continuing the drive
towards economic transformation and reinforcing ‘our status as a world-class
trading hub’.
“Given the country’s successful management of Covid-19, alongside with the rapid
development of vaccines, we now see a more positive investment landscape,” she
said.
The International Monetary Fund (IMF) and World Bank also projected a positive
trend for the UAE economy following a quick progress on the vaccine development
and swift implementation programme announced by the government. The IMF
predicted 1.3 per cent growth for the UAE economy this year that will be
accelerated to 2.2 per cent in 2022 while World Bank shared a conservative view
with one per cent GDP hike in 2021 and 2.4 per cent in 2022.
Another research, conducted by FocusEconomics, forecasts that the UAE’s GDP will
expand 2.6 per cent in 2021, which is up 0.2 percentage points from last month’s
forecast, and 3.9 per cent in 2022.
This year, the economy is expected to grow as it recovers from its
pandemic-induced slump in 2020. A pickup in oil demand and an uptick in tourist
arrivals brought about by the postponed Expo 2020 in Dubai should boost economic
activity. However, lingering uncertainty over the course of the pandemic clouds
the outlook, according to the latest report by FocusEconomics.
“There were already some signs of a sequential pickup in activity in second half
of 2020 and we expect to see a further strengthening in 2021,” Monica Malik,
chief economist at Abu Dhabi Commercial Bank (ADCB), said.
“The global vaccine programme will be essential to this recovery, and thus
should be more meaningful in second half of this year. Externally facing
services sectors should lead this rebound, which will be further boosted by the
hosting of Expo,” she added.
Saad Maniar, senior partner at Crowe UAE, said well-planned vaccination drive by
the UAE government, improved relationship with Israel and Qatar puts the economy
in the driving mode.
“Also, the fact that UAE being ahead in the deployment of technology and AI and
moving toward the maturity in this area, will further contribute to the overall
growth,” Maniar told Khaleej Times on Tuesday.
“I foresee the surge in the economy, and with that the inflation and the
interest rates are likely to go up,” he added.
Vijay Valecha, Chief Investment Officer, Century Financial, said the UAE economy
continues to advance as one of the most competitive and diversified economies in
the region, backed by the country’s leading policies under the guidance of its
wise leadership and goals outlined in UAE Vision 2021 and the UAE 2071.
“The World Bank report suggests out of 190 countries in ease of doing business.
The UAE was ranked first in the Arab world and 11th globally. UAE was also
ranked first globally in getting electricity, second in paying tax, fifth in
dealing with construction permits, seventh in registering properties, and ninth
in enforcing contracts. The business-friendly nature of the UAE means it is
well-positioned to capitalise on the upcoming global recovery,” he said.
Valecha said the advanced technological and social infrastructure UAE possesses
enabled it to tide over the Covid crisis successfully. The country has done mass
testing and screening of its citizens, which helped put the Coronavirus crisis
under control.
“High-speed internet infrastructure ensured a seamless transition to WFH
environment. Advanced technology and its ability to control the pandemic meant
UAE was open for business when other countries were going through a rigorous
lockdown. UAE’s recent efforts to normalise relations with neighbouring
countries and its recent reforms, including permission for 100 per cent
investment should enable it to post a ‘V-shaped’ recovery,” he said.
Global recovery
For international markets, the FAB report predicts that a good return to global
growth is possible by the second half of 2021, with developed economies entering
a period of stabilisation as they emerge from Covid-19. Emerging markets were
particularly impacted by the pandemic, but currency devaluations, along with
massive fiscal and monetary stimuli in some of the biggest developing economies,
suggest emerging markets may be in good shape for a period of gains.
An overvalued US dollar is also likely to weaken further than its recent falls
during 2021, partially as a result of a reversal in many of the haven-seeking
flows that drove investors into US assets earlier last year, which should also
support emerging markets and commodities.
Alain Marckus, managing director and head of Investment Strategy and Investment
Management, Personal Banking Group, said global markets will begin a clear
recovery from the Covid-19 downturn during 2021, but this will start with a move
towards stability rather than acceleration.
“Developed economies including the United States and Europe will feel continuing
effects from cautious consumer spending, higher rates of unemployment following
the pandemic, and business restructuring. The United Kingdom will also contend
with the full impact of Brexit and its departure from the European Union,” he
said.
“Effectiveness in responding to the pandemic will likely be a factor in the
speed of recovery in different markets, including the impact of stimulus
measures. After their worst year in several generations, the world’s largest
developing nations are poised for a strong recovery in 2021. As soon as vaccines
are widely available, their economic recoveries could be very strong, given the
record stimulus released in many of the large emerging economies this year,”
Marckus said.
GCC will benefit
Among Mena markets, GCC states will benefit from government stimulus programmes
and extra liquidity injected into local economies in response to Covid-19.
According to Fitch Ratings, off-budget stimulus has amounted to nearly 30 per
cent of GDP in Bahrain and Oman, more than 10 per cent in Kuwait, Qatar and the
UAE, and more than seven per cent in Saudi Arabia.
“GCC economies will also benefit as oil demand and prices continue their slow
recovery from severe falls in second quarter of 2020. However, with the US
Energy Information Administration (EIA) estimating the global demand for
petroleum and liquid fuels was 92.38 million barrels per day in 2020, about 8.8
million barrels per day lower than the previous year, a return to the levels
recorded in 2019 is probably not going to occur until 2022,” the report said.
FAB predicts the oil price for Brent will recover to average $58 per barrel this
year, followed by $65 in 2022. In the medium term, improved growth should also
result from well-received reform initiatives, as well as from normalised
relations with Israel and Qatar.
|