Devoid of the help of complex matrixes, statistical tools and economic models, one can easily forecast the post-COVID-19 outlook of the UAE economy.
It is simple. Open your eyes: there are signs of green shoots all around. The easiest ones to identify are the surging traffic on the roads, the steadily building footfall in malls and the fast disappearing availability of parking spaces during the business hours.
Last weekend, I turned up at a prominent mall in Dubai. I saw a small traffic congestion building up at the entrance, but anyway decided to go in. It took only a few minutes for me to realise I was at the tail end of a serpentine queue of shoppers waiting to enter the mall’s parking. After nearly an hour of wait, I had to choose the nearest exit.
Clearly, confidence is gaining traction among consumers and businesses and solid economic fundamentals of the UAE are at play in the background.
Return of confidence
Key sectors of the economy such as the real estate, financial services, trade, travel, tourism and hospitality sectors are reporting a resurgence in demand.
Take a look at Dubai’s property market, which had been on a decline for the past few years and hit hard by Covid-19 last year is back in international headlines in recent weeks for all the right reasons with global buyers queuing up for the luxury properties. The rich and the uber-rich around the world are eager to own a piece of luxury in prime locations in the UAE before the prices went up too high.
The demand surge in the affluent segment is already trickling down to the affordable segment of the property market and is set to gain pace as the economic recovery creates new jobs and supports larger number of population.
The derived demand form expat families returning and children back to schools and colleges are certain to lift the demand for affordable homes both in rental and sale market. Of course, that comes with greater consumption demand supporting retail, hospitality, financial services and travel segments of the economy.
The UAE’s economic recovery is firmly rooted in its approach to prevention and spread of COVID-19. The country has effectively contained the pandemic even as the second wave of infections is playing havoc in many parts of the world, thanks to the massive efforts of fast-paced inoculations.
The country had limited the health impact of the first wave of COVID-19 due to its relatively young population and a range of effective containment measures, which have limited the spread of the virus and the number of deaths.
As it stands, it appears that the country has either avoided and or drastically mitigated the impact of a second wave of infections that affected most parts of the world.
The UAE’s coronavirus vaccination is the world’s second fastest and the fastest in the Arab region. The country has administered more than 12 million doses of COVID-19 vaccine since launching the nationwide drive in December. Nearly 120,000 doses of vaccine are administered daily, one of the highest in the world per capita. The country has already passed the critical minimum number of inoculations required for crowd immunity and is on target is to immunise 90 per cent of the population by June.
Tapering of gloom
The reopening of economy that started in September with most businesses authorised to resume and international borders partially reopened, the economic gloom has been gradually tapering.
Data shows the number of tourist arrivals have picked up, hotel occupancy recovered, and shopping malls and entertainment venues have remained open since the fourth quarter of 2020.
While the reimposition of travel restrictions in some countries are likely to weigh on travel and tourism sectors, domestic demand is on an upswing as restrictions and social distancing norms are being gradually eased with decline in rate of infections and progress in vaccinations.
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’s index (PMI) data showed clear signs of improvement in the non-oil sector with jobs and output growth gaining traction. Business conditions continued to improve in April, with new business growth reaching a 20-month high.
The PMI, which covers manufacturing and services, edged up to 52.7 in April from 52.6 in March. This was its highest level since July 2019 and the fifth consecutive month it has held above the 50 line that separates growth from contraction.
Last week, His Highness Sheikh Mohammad bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, announced that the UAE created nearly 248,000 jobs last year when most global economies contracted sharply and millions of people lost their jobs in almost every part of the world.
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 on 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.
A number of bold policy decisions to jump-start the national economy such as granting citizenship and or longer-term visas to select categories of foreigners will function as an effective tool to boost high quality human resource, a key ingredient for sustained growth.
The latest in a slew of reforms is the move to allow 100 per cent foreign ownership of a vast array of business that will open floodgates of foreign direct investments along with talent supporting domestic productivity and demand.
The tail end of the demand multiplier that is quietly at play will see greater support for commercial and residential real estate, banking, financial services, retail, travel and tourism sectors.
While vaccinations efforts are in progress across the world, some disruptions are bound to happen due to the resurgence of infections in some parts of the world.
The UAE, with a strong domestic economy backed by robust policies, fiscal strength and advanced infrastructure will have a head start among its regional and global peers when the rest of the world is ready for business.