UAE continues to inspire: Economic recovery in full swing

2021 has been a year of reckoning for the UAE as it moved quickly to address the health and economic effects of the Covid-19 pandemic. The country was able to register the highest GDP, higher than the growth of 2019, which would have been a distant reality at the start of 2020 — the onset of the pandemic. This can be primarily attributed to a number of factors but the most prominent ones are the ability of the government to manage Covid-19 and easing of restrictions; introduction of reforms and stimulus measures for businesses to revive economic activity; and the rebound in oil prices.

The UAE introduced economic stimulus measures worth Dh388 billion ($105.7 billion) to offset the impact of the pandemic. The revival of oil prices in 2021 to an average around $70 per barrel from a low of $19.3 per barrel in mid-April 2020 has also significantly boosted business sentiments. As a result, the UAE reported a GDP growth of 3.8 per cent in 2021, higher than the estimate of 2.1 per cent by the World Bank.

Furthermore, the GDP is estimated to grow by five per cent to six per cent this year despite inflationary pressure as it recuperates from the pandemic and by the same pace over the next few years to help double the economy by 2031.

Higher oil benefit economy

The continued rise in oil prices have positively benefitted the government revenues and provided additional buffers to accelerate public spending programmes. The average price of Brent Crude in 2020 was $43.2 per barrel, which was in line with the averages seen in 2016 and 2017. The oil prices averaged around $70.9 per barrel in 2021, an increase of 64.2 per cent compared to the average recorded in 2020. Given that the oil prices are hovering around $100 per barrel in April and averaging around $90 per barrel in 2022 so far, it continues to aid the broader economy, especially the non-oil sector activity with the additional liquidity for the banks to provide funding to local corporates. At the same time, the UAE remains committed to the Opec+ agreement and its existing monthly production adjustment mechanism.

UAE remained at the forefront in terms of its Covid-19 crisis management and successful governance during the pandemic. Widespread testing and containment measures helped limit the initial spread of the virus, while early vaccination efforts have resulted in vaccination rates among the highest globally. The country not only demonstrated preparedness through developing capacities that assisted in effective anticipation, response, and recovery from the crisis but also deployed effective actions to mitigate the damage through multiple initiatives.

Expo beneficiaries

Most notably, the ability of the UAE government to accelerate the vaccination program and mass testing to ease the pandemic-led restrictions has helped in making Dubai Expo a success. Managing an event of such magnitude and scale during challenging times has been commendable to say the least, with the UAE government and its leadership being duly lauded by global economies for its efforts in efficiently organising the gala. The biggest beneficiary of the Expo 2020 Dubai has been the hospitality sector, which witnessed a much-needed boost since the Covid-19 induced shut-down.

According to Department of Economy and Tourism (DET) of Dubai, the Emirate recorded a total of 979,700 international tourists in January 2022, an increase of 116.6 per cent year-n-on-year basis compared to the same month of the previous year. Hotel occupancy rates in Dubai was closer to approximately 80 per cent during the past four to five months; however, it is expected to normalise post the event. Nevertheless, it has given an impetus to the hospitality, travel and tourism industries, which were severely impacted due to travel restrictions.

Economic diversification

Economic diversification and FDI inflows remain the key to economic recovery for the GCC region. Amid the post-pandemic trends of rapidly changing investment landscape and diverse economic priorities of global economies, the UAE has continued to prioritise on increasing FDI to drive economic growth. The country attracted FDI worth $20.7 billion (Dh76 billion) in 2021, an increase of 3.9 per cent from the previous year. This led to the country's cumulative FDI over the past 10 years to reach approximately $171.6 billion by the end of 2021, a growth of 13.7 per cent.

According to AT Kearney’s FDI Confidence Index 2021, the UAE ranked first in the Mena region and 15th globally — an improvement from a ranking of 19th in the previous year. Both the increase in value and improvement in ranking reflects the confidence of investors in the UAE’s leadership and their ability to continue the growth trajectory.

Moreover, the UAE has rolled out a number of reforms during the past few years, especially the permitting of 100 per cent free ownership in all major economic sectors, in line with the objective of modernising the business landscape and boost its competitiveness in the global arena.

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Shailesh Dash is an investor, advisor, ideator and founder of Dash Venture Labs. Views expressed are his own and do not reflect the newspaper’s policy.