The UAE Economy Will Bounce Back in 2021
While the global pandemic has seen economic growth projections universally revised downward, the Emirati economy will continue to be a worthy destination for your next business ventures. 2021 will mark the United Arab Emirates’s golden jubilee marking 50 years since its founding in 1971, and even before the pandemic, the country has been immersed in the Vision 2021 plan to continue its economic diversification. So, what is the economic outlook for the UAE in 2021? In essence, it will bounce back.
The future of the UAE economy
The International Monetary Fund, or IMF, recently issued an economic report detailing revised Gross Domestic Product (GDP) growth projections for the UAE and the rest of the Middle East and North Africa (MENA) region for 2020 and 2021. While the IMF stated that the Emirati economy would contract by 3.5 per cent in 2020 due to the uncertainty surrounding the coronavirus, it will rebound with a projected economic outlook of a 3.3 per cent increase in its GDP. The contraction of the Emirati economy is in line with the rapid deterioration of the world economy and other countries in the region that has been a feature of this unprecedented global public health crisis.
What are some reasons why the outlook is rosier for the UAE compared to other regional players? For starters, one of the features of the UAE’s economy is its efforts in promoting the diversification of industries. While the IMF stated that the decline in oil prices, which the UAE projected to be at under $45 US a barrel until 2023, in this sense, the UAE will not bear as much of an impact as it will to other economies that heavily rely on oil imports and exports.
Plus, most of the Gulf Cooperation Council member nations (the UAE among them), have more robust economic positions compared to other MENA countries. They are also better prepared to absorb the impact from structural shocks, as Oxford Economics Assistant Economist Ahmed Esam remarked in a research note. With that in mind, more than 100 initiatives across the UAE’s Federal Government and the individual emirates themselves have been launched to support small-and-medium-sized enterprises that comprise 94 per cent of all entities in operation in the UAE and employ over 86 per cent of the country’s private sector workforce, among other critical areas of the economy. Free Zones (such as the DIFC offering rent-free support) have also enacted separate measures to help their entities to ensure that they can withstand the economic downturn. These measures are critical as the UAE has long looked to transition from an export-based economy to a competitive knowledge economy through its wealth of state-sponsored programmes.
Which UAE economic sectors are primed for growth now and in the post-COVID 19 economy?
According to an interview with Khaleej Times, Fame Advisory DMCC Director Nariv Shah, Expo 2020 will give an extra boost to the Emirati economy. Despite the tumult, there are still industries that will be in demand, such as healthcare/pharmaceuticals, food and medical equipment. While the momentum for the in-demand sectors will remain, Shah also predicts that “...e-commerce, delivery services, telecom and MICE sectors will gain momentum post Covid-19.” The Meetings, Incentives, Conventions and Exhibitions tourism segment (MICE) saw many of the events typically held in the UAE in March postponed until November. As for those events that will not be back until next year, Shah said that the fact they will return in 2021 would give the Emirati economy an added boost.
As for Expo 2020, the Bureau International des Expositions (BIE) agreed to take up the recommendation from the authorities in Dubai to postpone the event until 2021. While Dubai will use the time to adapt the Expo to potential restrictions, it opens up the opportunity to the around 50 countries that did not commit to setting up pavilions. Should they choose to participate, the event could have a larger footprint than before. The Expo’s “...sub-themes of “Sustainability, Mobility and Opportunity” will feature more prominently since these are the very challenges that the new world will be grappling with.”
Would you like to take advantage of the UAE’s bright economic future?
As UAE company formation experts, we have the local know-how and knowledge you need to make your entrée into the Emirati market a success. Whether it be through Free Zones or a Mainland enterprise, we will guide you through all the factors to consider. Would you like to get started? Get in touch with us today.
CEO, Europe Emirates Group