UAE set for post-Covid recovery in 2021
While short-term challenges must still be overcome, the UAE remains an attractive place to do business as its 50th anniversary nears
As the world recovers from the ravages of the Covid-19 pandemic in 2021, the UAE will celebrate its 50th anniversary. It will also host Expo 2020 Dubai.
With one of the most diversified economies among regional oil producers, vast sovereign wealth and easy lines of credit, the UAE already had an economy that was better positioned to roll with the punches of the Covid-19 crisis than many others in the region and around the world.
While the global pandemic has slashed oil prices and devastated specific industries – especially aviation – the UAE has responded decisively to the crisis. It has curbed case numbers, enforced basic Covid-19 hygiene, ramped up test capacity, and invested heavily in test and vaccine development.
The no-nonsense approach has been confidence building, despite the inherent vulnerabilities of the UAE economy to the Covid-19 pandemic, with deep impacts to the finance, travel and hospitality sectors. The UAE’s financial sector, which will be pivotal to future growth, has been well supported.
The government’s efforts to move back to a new economic normality swiftly but safely is also positive. Economic activity shows signs of improving, driven by domestic demand as the large expatriate population gets back to spending after months of restrictions on everyday activities.
The government’s no-nonsense approach to the pandemic has been confidence building
Project activity, while reduced, has continued to rumble along in the background, with activity in upstream energy and the utilities sector providing ongoing opportunities for contractors.
With some $868bn-worth of projects planned or under way, and about $132bn under execution, the UAE is the second-largest projects market in the Middle East and North Africa region.
The big challenge for the UAE market over the coming year in the wake of the Covid-19 outbreak will be dealing with the paradox of government stimulus spending coupled with a drive to cut costs and project spending.
In this challenging environment firms will have to be smart if they are to prosper. Selecting the right clients, specialising in niche sectors, and introducing novel technologies are all tools companies can harness in order to stay ahead of the competition.
Although there are undoubtable challenges in the short term, the long-term prognosis is still healthy. Regardless of what happens, the UAE market will remain one of the largest projects markets in the region.
The pipeline of projects in the UAE sits at more than $672bn. Of this total, $417.7bn is for construction project, $82.9bn for transport projects, and $95.3bn in oil and gas. The pipeline consists of $63.7bn of projects in bidding, $492.9bn in design or front-end engineering and design (feed), and $114.8bn under study.
When travel resumes, even if international tourist traffic and inbound visitors remain curbed, the role of the UAE’s airports as transit hubs for business and leisure travellers should ensure a ramp-up in passenger volumes again, potentially ahead of the global curve.
As other regional economies continue to wobble, the UAE will remain an attractive place to do business. The postponement of Expo 2020 Dubai increasingly looks like a boon that will allow Dubai to ride a wave of post-Covid enthusiasm for new business opportunities augmented rather than diminished by the pandemic.
The signing of the Abraham Accords in September 2020, and the normalisation of relations between the UAE and Israel, the region’s two leading players in technology, introduces the potential of previously unexplored opportunities in areas such as technology, tourism, security, healthcare, and water and food security, and adds a new dimension to the UAE market.
For those seeking to find opportunities, understand risks and set strategy in the UAE, MEED Insight’s new report, Outlook UAE 2021, is a powerful resource that examines the outlook for the UAE market in the aftermath of the global pandemic and the prospects for projects and investment in the region’s most dynamic economy.