UAE’s non-oil economy to grow between 3.6 and 4.2% in 2021

According to the data handled by the Central Bank of the United Arab Emirates (UAE), the non-oil Gross Domestic Product (GDP) will grow by 3.6% next year. The report presented by experts from Oxford Economics is more optimistic, estimating non-oil economy growth of 4.2% in 2021.  

With regard to the recession caused by the health crisis, the Central Bank believes that in 2020 the non-oil economy will contract by 4.2%, while Oxford Economics in this case points to less encouraging data and notes that the contraction was 7.4%, predicting that it will not return to pre-crisis levels until mid-2022.  

As for general GDP, which also includes oil activity, it offers more discouraging data, at least according to Oxford Economics' estimates, which predict a 7.8% fall in 2020 and only 1.1% growth in 2021.  

The oil sector will continue to be a drawback for economic growth, as the latest OPEC agreement envisages that the Emirates will increase its production only slightly compared to the second half of 2020.

Another pillar of the country's economy, alongside oil, is tourism, which accounts for 16% of the Emirate's economy. The report highlights that "despite a significant increase in stays among UAE residents, hotel occupancy rates are well below those of a year ago". As a result, the number of visitors is expected to have fallen by 60% by 2020.  

The decline in Dubai's tourism sector is, along with the oil sector, the biggest brake on economic growth. Although, fortunately, as restrictions are progressively eased throughout the country, there is an increase in activity especially in retail and leisure 

In terms of employment, the report warns that the slow recovery is wreaking havoc. A recent survey by Mercer, an HR consultancy, found that 30 per cent of companies plan to reduce their workforce, particularly in the retail sector.  

The retail sector is hampered by travel bans and restrictions in Europe and elsewhere. But Oxford Economics argues that the delay of the 2020 World Expo in Dubai could be key to the country's economic rebound. "The increase in tourists coming to the country should result in a more significant overall contribution to the economy," they say.

"Despite oil production cuts and lower oil prices, the UAE has enough financial reserves to maintain fiscal support for the economy through 2021, which should benefit growth in the longer term as well. It does not seem likely that the authorities will significantly increase short-term support for business, but they appear primed to support the economy in the recovery phase. This includes preparation for Expo 2021 and also funding for new sectors such as the digital economy," said Michael Armstrong, regional director of ICAEW, the organisation that commissioned the Oxford Economics report.  

The Central Bank has already announced support packages for the economy worth $105.6 billion. For its part, the committee in charge of coordinating and implementing the UAE's economic recovery plan met for the second time last Saturday to review the progress of the 15 initiatives of the first phase of the plan, revealing that 46% have been completed so far. 

Important initiatives enacted to date include amendments to the bankruptcy law, the allocation of subsidies and incentives to tourism establishments, the promotion of foreign direct investment through amendments to the law on commercial companies, amendments to the law on commercial transactions, the decriminalisation of bounced cheques, the reduction of fees and taxes in the tourism sector, the improvement of labour market flexibility and a comprehensive targeted economic support plan led by the Central Bank to improve liquidity in the country's financial and banking sector. 

In addition, the committee focused on the achievements of each of the six tracks of the package of initiatives, which include empowering the new economy and developing priority sectors; opening new markets locally and internationally; providing financial support and facilitating loans; promoting tourism; attracting and retaining talent; and stimulating innovation. 

"Protecting, supporting and further developing the economy according to a sustainable model is a priority within the strategy and plans of the UAE government. We are continuing our efforts to complete the implementation of initiatives of the recovery plan according to the approved schedule," said Minister of Economy Abdulla bin Touq Al Mari, who chairs the committee.