The UAE economy is poised for a fast recovery from the impact of COVID-19, thanks to the massive efforts to contain the virus through inoculations and robust reforms.
The country has limited the health impact of the COVID-19 pandemic due to its relatively young population and a range of effective containment measures, which have mitigated the spread of the virus and the number of deaths.
The UAE’s coronavirus vaccination is the world’s second fastest after Israel. The target is to immunise more than half of the residents by March and 90 per cent by June.
The reopening of economy that started in September with most businesses authorised to resume, travel restrictions lifted, and international borders partially reopened, the economic impact is gradually tapering.
Data shows the number of tourist arrivals have picked up, hotel occupancy recovered to 70 per cent, and shopping malls and entertainment venues have remained open since the fourth quarter of 2020. The restrictions and social distancing norm are likely to fade as the infection numbers come down with the progress of the vaccinations.
Dubai International Airport saw 25.9 million passengers in 2020. It meant a 70 per cent year on year drop. However, the last quarter of 2020 saw some strong recovery.
The oil sector became a drag on growth last year as crude oil production declined by about 10 per cent due to the OPEC+ agreement. However, the recent recovery in oil prices signals better than expected revenue stream.
Latest purchasing managers’ index (PMI) data showed clear signs of improvement in the non-oil sector in December and January with jobs and output growth gaining traction.
Reforms and opportunities
Historically, the UAE economy has proved its agility to adapt and reform to turn adversities to its advantage. The economic impact of the pandemic in 2021 is going to be limited in the UAE, as consumers and business have found ways to adapt, thanks to the major progress made in digital transformation.
The progress in digital transformation has opened opportunities for small and medium size enterprises (SMEs) and offered the potential of enhanced productivity, which will enable the UAE to achieve sustainable higher growth over the medium to long term.
Undoubtedly, a number of recent reforms undertaken by the UAE in granting citizenship and longer-term visas to select categories of foreigners; and normalisation of diplomatic relations with Israel and Qatar will attract global talent, foreign direct investment and will function as an effective tool to boost high quality human resource, a key ingredient for sustained growth.