Economists expect household spending in the UAE to return to normThe UAE economy is highly intertwined with other major developed and emerging market economies.al within 6-12 months
The UAE economy is expected to stage a gradual recovery to pre-COVID-19 levels in the mid to latter part of 2021, with full recovery expected only by 2022, according to leading economists in the UAE. Normalisation of economic growth in the UAE will be closely tied to the fortunes of the global economy and the fate of oil markets.
The recovery is likely to be very gradual in nature. This is because the UAE economy is highly intertwined with other major developed and emerging market economies. The UAE relies heavily on inbound trade and tourism revenue to fill up its coffers.
For the scenario of a post-lockdown recovery, the recent macroeconomic picture coming out of countries like China and some parts of Europe indicate worrying trends. The global population has now turned extremely cautious in order to halt further spread of the virus. Previous optimistic estimates for a sharp V-shaped recovery have been further superseded by expectations of a U-shaped and even worst case L-shaped recovery,” said Vijay Valecha, Chief Investment Officer, Century Financial.
Growth estimates
The UAE economy is expected to contract this year with the latest International Monetary Fund projections estimating -3.5 per cent real GDP growth for 2020. This is against a growth rate of 1.5 per cent seen last year.
2019 itself was not a particularly strong year for UAE growth, with real GDP rising by just 1.7 per cent.
“A recovery back to this level may well be possible but it would still fall short of average growth rates over the last few years which have been in the 2 to 3 per cent range. A return to these rates of growth will probably require both the domestic and the external economies to be firing strongly,” said Tim Fox, Executive Vice President, Group Chief Economist and Head of Research at Emirates NBD.
