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Aden - Yasmine El Tohamy - Expo 2020 Dubai, the Middle East's first World Expo event, will be pivotal to the rebound that is expected to boost the UAE's non-oil GDP growth.
The outlook for the UAE's economy remains promising, with economic growth expected to accelerate from an estimated 1.9 per cent in 2019 to around 2.2 per cent in 2020, driven by non-oil economic factors underpinned by reforms and stimulus packages.
According to the Institute of Chartered Accountants in England and Wales (ICAEW), Expo 2020 Dubai, the Middle East's first World Expo event, will be quite pivotal to the rebound that is expected to boost the UAE's non-oil GDP growth to about 2.8 per cent.
In its Economic Update: Middle East Q4 2019, produced in partnership with Oxford Economics, the accountancy and finance body says Expo 2020 Dubai, which is anticipated to attract 25 million visitors (14 million from overseas), is forecast to contribute up to 1.5 per cent of the UAE's overall GDP in 2020.
A recent forecast by the International Monetary is also in line with the ICAEW prediction. The International Monetary Fund forecast that with an expected GDP growth rate of 1.6 per cent for 2019, the UAE's economy to grow by 2.5 per cent in 2020 on the back of Expo 2020 and the government's Dh50 billion fiscal stimulus.
"The relevant authorities have stepped in to support non-oil activities in the country. Both Abu Dhabi and Dubai are implementing fiscal packages, while the recent interest rate cut by the US Federal Reserve, which the Central Bank of the UAE followed given the dollar peg, should support private sector credit growth. However, these measures are yet to have a significant impact on the UAE's non-oil activity," the ICAEW report said.
The expansion in non-oil activity is slowly beginning to translate into stronger job creation, although at a modest rate. Total employment in the private sector increased by 1 per cent year-on-year in the second quarter 2019, up from just 0.1 per cent year on year in first quarter.
"While total employment increased in other sectors; which include tourism and real estate, it declined in the remaining sectors, including construction, services and manufacturing," it added.
The ICAEW report says market conditions are unlikely to see much of a rebound in the remainder of 2019 and the first half of 2020, reflecting expected strong supply growth and continued subdued demand. Nonetheless, despite some pick-up in real estate transactions and employment, residential home sales prices continue to slide in both Abu Dhabi and Dubai, it said.
Although the legacy of Expo 2020 is hard to estimate, the investment climate remains positive with infrastructure upgrades. In 2019, the UAE has attracted $12.7 billion in foreign direct investment in the first half, an increase of 135 per cent year-on-year, while tourist arrivals rose 3 per cent in the same period to reach 8.4 million.
"Unlike other countries in the region, the UAE has produced more oil this year compared to last year - pumping at a steady pace of around 3.1 million bpd, up from three million bpd in 2018. Overall, this implies a positive contribution to growth from the oil sector, which has expanded by around 2.5 per cent year-on-year in 2019, unlike a drag elsewhere in the region," the ICAEW said.
Editorial Director of Al Khaleej Today, is a well-connected Indian journalist and an economic and financial commentator. He has been in the UAE's mainstream journalism for 35 years, including 23 years with Al Khaleej Today. A post-graduate in English and graduate in economics, he has won over two dozen awards. Acclaimed for his authentic and insightful analysis of global and regional businesses and economic trends, he is respected for his astute understanding of the local business scene.
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