ICAEW?s report has observed that the UAE economy has been relatively disappointing since the start of this year, due to the government having to tighten restrictions in response to soaring COVID-19 infections
These restrictions have prompted a downward revision to Oxford Economics? UAE growth forecast for 2021, but GDP is predicted to grow by 5.5% in 2022, as both oil and non-oil sectors pick up again strongly.
According to the report, the UAE?s non-oil GDP is expected to expand by 3.3% in 2021, down from 4.2% predicted three months ago. Given the ongoing oil GDP slump, total GDP will be flat this year, after an estimated fall of 7.7% in 2020, the biggest fall in three decades.
The report outlines that concerns over resurgent COVID-19 cases are weighing on business optimism. Despite an improvement in employment, it will be difficult for these gains to hold against the backdrop of weakening retail industry and recreation activity levels.
The travel and tourism sector, which accounts for approximately 16% of the overall GDP in the UAE, will have a difficult first half of 2021 due to the new COVID-19 restrictions. The relative normality of day-to-day life in Dubai and the easing of travel restrictions such as an air corridor with the UK, led to a rebound in the tourist sector at the end of 2020 with hotel occupancy rising strongly, but it has since taken a hit.
Although the UAE?s short-term prospects for travel and tourism remain weak, recovery is likely to be strong when it does take hold. This is due to three main factors:
Vaccination: the UAE?s vaccination programme has been among the fastest in the world, with over half the population having received at least one dose.
Residents: a marked rise in ?staycationers? has helped fill the void left by international travellers. This trend is set to continue as the vaccine roll-out means the willingness to travel in Dubai will continue to climb even if international visitors remain hesitant.
Tourists: the surge in travel to Dubai in the fourth quarter of 2020 illustrated the willingness of people to start travelling again. This also bodes well for the success of Expo 2020, rescheduled to October this year, which will create an opportunity for a faster recovery in Dubai. Improved relations with Qatar and Israel will also boost visitor numbers.
These factors, combined with government policy reforms that will stimulate growth in the rest of the non-oil economy, mean that a robust economic rebound is expected, with non-oil GDP growth forecast to rise above 5% in 2022.
Michael Armstrong, FCA and ICAEW regional director for the Middle East, Africa and South Asia (MEASA), said, ?The first quarter of 2021 has been challenging due to the need to tighten restrictions in response to soaring COVID-19 infections and the oil GDP slump. However, we are encouraged to see the rapid roll-out of COVID-19 vaccines by the UAE government. While the economy continues to be affected by re-imposed travel bans, a successful vaccination programme will be a great step in restoring confidence in the UAE in 2021.?
