While no one could have foreseen that the world will face an unprecedented pandemic in 2020 – one that nearly halted economies and industries across the globe – the UAE has proven that planning for the future and implementing proactive strategies can help build a resilient economy that can withstand even the most difficult times.
The UAE’s approach to the pandemic has been one of “plan, research and act,” rather than simply following the herd. Since the onset of the pandemic, the UAE government has been launching initiatives aimed at sustaining the economy and the livelihoods of its people.
The Central Bank of the UAE allocated a AED 100 billion Economic Support Scheme for retail and corporate businesses affected by the pandemic.
To date, Dubai has launched an economic stimulus package worth up to AED 7.1 billion, while the Abu Dhabi Executive Council earmarked AED 3 billion for the SME Credit Guarantee Scheme.
Unlike in other parts of the world, these stimulus packages are invested into the economy and businesses, rather than individuals.
The UAE has spent years laying down the foundation and the infrastructure to become the region’s leading economic, financial and tourism hub, and it is now in a great position to reap the rewards of that investment.
UAE economy to continue growing in 2021 and coming years
Experts anticipate the UAE’s GDP to grow by 2.6% in 2021 and 3.9% in 2022. Although last year brought many challenges to the country’s business community, it also became a record year for new business licences, mostly in the e-commerce, logistics and consulting sectors.
This trend confirms that positive market sentiment in the region is increasing despite a challenging year, a development coinciding with data from authorities that forecast the UAE’s non-oil GDP to expand by 3.6% this year.
Foreign Direct Investment will increase primarily due to new policies
The UAE has been making significant improvements to its corporate climate to further attract Foreign Direct Investment (FDI). The government has recently amended its Commercial Companies Law to include more business activities that allow 100% foreign ownership in the mainland.
The UAE also stands to benefit from the stabilising geo-political situation in the region. With its normalised relations with Israel following the Abraham Accords, experts estimate that annual UAE-Israel trade will reach USD 4 billion and create approximately 15,000 jobs.
Cooperation between the two countries is expected to focus on the following industries: financial investment, technologies, defence, energy, medicine and tourism.
Trade with Qatar has also restarted and is anticipated to bring in regional investment and economic opportunities between the two countries, particularly in retail, logistics and cargo operations. Previously, UAE-Qatar trade was estimated to be worth USD 3.5 billion.
In addition, low entry barriers for company formation and the ease of business setup will continue to drive FDI into the country.
Real estate sector to sustain recovery and growth
The real estate market has stabilised after a large two-year correction. Amid the pandemic, the UAE real estate sector proved its resiliency and Dubai even witnessed an increase in property sales in the latter part of 2020.
More investments are expected to pour into the local real estate industry, as experts predict Qatar, a major natural gas producer, will leverage the UAE’s geostrategic position to access other markets.
Expo 2020 to boost key economic sectors
Though it has been rescheduled to open in October 2021, the much-awaited Expo 2020, combined with the UAE’s open border policy, will stimulate the tourism and hospitality sectors, along with the F&B, retail and real estate markets.
The Dubai Expo was previously estimated to add over AED 120 billion to the UAE economy, augment the national GDP by 1.5 percent and welcome 25 million visitors from all over the world.
Dubai’s role as a business and travel destination hub will be pivotal
The illustrious status of Dubai as a world-class business, lifestyle and travel hub will continue to play a key role in drawing foreign investors and generating economic activity, not just in the emirate but across the entire country.
Following quite a challenging year, experts are still optimistic about the outlook of Dubai’s economic performance, which they estimate to grow by 4.1% in 2021.
In December, the UAE saw a 3.5% increase in the number of foreign companies operating in the country compared with the previous month. A large number of the companies were based in Dubai, 2,446 of which were foreign businesses while 763 were branches of other Gulf companies.
Fintech industry to soar in the UAE
The fintech sector is ripe for further growth. As consumer behaviour shifts more to online purchases and e-commerce services, the demand for more innovative and responsive digital payment solutions will surge.
This development has already become evident in recent years. During the first half of 2020, Dubai International Financial Centre welcomed 87 new fintech initiatives, which represents a 75% year-on-year increase. DIFC also registered 310 new financial firms in early 2020, marking a 25% increase from the same period in 2019.
Aside from these, DIFC has concluded an agreement with Israel’s FinTech Aviv in November to collaborate on knowledge sharing, talent development and mutual expansion.
Conclusion: The UAE has established a robust economic framework that will pivot it towards certain economic recovery.
The effects of the pandemic can be seen and felt worldwide. Although the UAE has expectedly been affected like other major economies, the trade and economic groundwork that it has founded over the years will be the driving force that will sustain its economic recovery.
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