GCC economies look forward to ’21
COVID-19 TO HIT GULF NATIONS’ GDP IN 2020, BUT WILL BOUNCE BACK NEXT YEAR: IMF
dubai — The UAE and neighbouring Gulf economies will contract this year, impacted by coronavirus, but they will rebound strongly next year as the situation is expected to normalise post-Covid-19, according to the International Monetary Fund’s World Economic Outlook released on Tuesday.
The UAE economy will contract 3.5 per cent this year but will bounce back with 3.3 per cent growth in 2021. The decline in the UAE and regional countries is in line with the contraction of the global and other major economies.
In the region, Iran will be the worst-hit country, contracting 6 per cent in 2020 after shrinking its gross domestic product growth by 7.6 per cent in 2019.
Saudi Arabia, the region’s largest economy, will shrink 3.9 per cent, Qatar 4.3 per cent, Kuwait 1.1 per cent and Oman 2.8 per cent. However, all the economies will rebound strongly as world economy will pick pace, resulting in higher oil prices and increase in growth of non-oil sectors.
Monica Malik, chief economist at Abu Dhabi Commercial Bank, said normalisation of the situation related to Covid-19 will play a big part in the rebound of the UAE economy and Expo being held in 2021 should also provide a boost. “It is the normalization of key sectors such as trade, tourism and hospitality etc. that will give fillip to UAE economy in 2021. Real estate will continue to see headwinds but it should moderate next year. The property sector will still have overhang in supply, limiting the pace of recovery. Non-oil sector like trade, hospitality, and logistics should help while global and internal demand will also pick up next year,” Malik said.
Nirav Shah, director of Fame Advisory DMCC, said as dust settles down next year, public and private sectors will resume full throttle, therefore, economies will definitely take off. “Even if we don’t get where we were prior to Covid-19, but there will be a better change. Plus, Expo 2020 will give a further boost to the economy.”
Even in these tumultuous times, he said, certain sectors such as healthcare pharmaceutical, medical equipment sector and food sectors are still in great demand. “These sectors will continue to lead even in coming years. I do expect e-commerce, delivery services, telecom and MICE sectors will gain momentum postCovid-19. Other traditional sectors such as logistics, travel, tourism and hospitality will rebound as fears about Covid-19 recede,” he said.
“We saw a lot of cancellation of MICE events since March with many of them shifted to November. So entire MICE population that used to come to the UAE, will be visiting the UAE next year. That will help in the reversal of fortune for the economy,” he added. IMF sees oil prices will remain below $45 a barrel through 2023, some 25 per cent lower than the 2019 average price, reflecting persistently weak demand. IMF also predicted that Middle East and Central Asia region will grow 4.0 per cent in 2021 after shrinking by 2.8 per cent in 2020. While Middle East and North Africa (Mena) will contract 3.3 per cent this year but expand 4.2 per cent in 2021.