UAE Economic Recovery

Businesses and Consumers in the UAE are Expecting Economic Recovery Now

UAE is among one of the first few countries to start an early economic recovery in 2021. A latest report from Emirates New Agency (WAM) along with Federation of Arab News Agencies, sheds light that the world’s second largest economy will overcome the current economic crisis soon enough, in fact according to the Central Bank of UAE early signs of economic recovery began back in the second half of 2020. 

In November 2020, the Fitch Ratings awarded The Federal Government of UAE with ‘AA’ rating. This denotes the stable outlook which can be managed by UAE in 2021 under its economic sector. The Central Banks of UAE expects a robust growth in 2021. Government is investing massive efforts to boost the country’s economy by spending on infrastructure and by encouraging private investment.

Expecting Full Recovery by 2022

The UAE economic recovery is expected to fully happen by the year 2022, with total real GDP rising. With a portion of Dubai EXPO 2021 taking place in 2022, this will be the product of continued fiscal spending growth, healthy bank credit growth, good improvement in jobs, and recovered business sentiment. Qatar is a major tourism, transit, and trade centre in the MENA area. The CBUAE expects the UAE to benefit from the FIFA 2022 World Cup.

In the fourth quarter of 2018, the decrease in PMI [Purchasing Managers’ Index] compared to the same time in 2019 was reduced to just -0.9%, touching the expansion zone of 51.2 in December. This represents the improved mood brought on by the preparations for the Dubai EXPO.

Real-Estate Economy

According to the central bank survey, the residential real estate price decline slowed significantly in the fourth quarter of 2020, with prices in Abu Dhabi reporting monthly rises in all months of the second half of 2020 and jobs picking up, with four months of month-on-month increases as of December 2020.


Due to the resumption of international travel, tourism and hospitality data in Abu Dhabi in November and December show an economic recovery in occupancy and revenue, the best result since February 2020.

The Oxford Stringency Index1 increased from 51 at the end of Q3 to 49 at the end of December 2020. This is suggesting that the economy is continuing to open. Given its position as a regional trade, transportation, and travel centre, the UAE benefited from this.

Fiscal Stance of UAE

The net operating fiscal balance in the third quarter of 2020, the most recent period for which data is available, reported a deficit of Dh4.6 billion, owing to a 38 percent drop in revenues to Dh67.8 billion year on year, while expenses fell by 21.7 percent to Dh72.4 billion. Despite the UAE economic downturn, both deposits and gross credit increased on a yearly basis but decreased on quarterly basis.

The fiscal deficit has widened from 1.2 percent of GDP in 2019 to 7.3 percent of GDP in 2020. According to IIF projections based on real data for the first three quarters of last year. The deficit would be about 14% of GDP if benefit transfers from the national oil company and investment income from the sovereign wealth fund (SWF) were excluded.

The reduction in non-oil revenues due to the deferral of certain government taxes and fees only partly offset the 7.5 percent drop in overall spending. At 37% of GDP, the federal government’s debt is still manageable. The public debt, including GRE debt, is about 65% of GDP.

Economical Inflation

Inflationary pressures on consumers remained negative in the fourth quarter of the UAE Economical status. This was due to a large decline in the price of non-tradables, which fell by 3.5 percent. (Goods and services that are not traded across borders, therefore their prices are mainly determined by domestic supply and demand).

Meanwhile, the price of tradables increased by 0.1 percent. In Q4, tradables prices increased, accounting for 34% of the CPI consumption basket, owing to increases in the prices of food and soft drinks, beverages and tobacco, and textile, clothing, and footwear. Meat, beverage, and tobacco prices rose at a slower pace than in the third quarter.

The large drop in non-tradables during Q4 was driven by continued declines in the housing component (34 percent weight in the market basket) by 3.4 percent year on year, transportation by 6.2 percent, and entertainment and culture by 25.3 percent.

Oil Industry

According to the central bank survey, as an oil exporter, the UAE is likely to feel the effects of lower global demand for oil as a result of a global slowdown in economic activity, including transportation and international travel. In line with the OPEC deal, UAE oil output dropped 17.7% YOY in Q3 and 18.2% YOY in Q4. In 2020, experts are expecting real oil GDP to fall, resulting in an average oil output of 2.78 million barrels per day.

Household Spending

Consumer spending has nearly doubled since March last year, according to economists. The UAE Federal government relaxed coronavirus-related restrictions to enable companies and other economic activities to resume. Restaurant sales almost doubled, as did consumer apparel spending.

According to a report released this week by the Dubai Chamber of Commerce and Industry, retail sales in the UAE are expected to recover and rise by 13% by the end of 2021, reaching $58 billion (Dh213 billion), boosted by consumer demand in the second half of the year.

The UAE leads the Middle East region in household e-commerce spending, with $2,554 (Dh9,380) per household, more than twice the global average of $1,156 (Dh4,245) and four times the Middle East average ($629 or Dh2,295).   

In recent months, the UAE has implemented significant economic reforms that will have a significant effect on future development. Foreign nationals in the UAE account for at least 80% of the total population. They are one of the key reasons for the Emirates’ prosperity over the last three decades. The government made many reforms to the Golden Visa Residency program late last year. This is done in order to draw experts and skilled professionals from a variety of fields.

UAE Economic Recovery: Economy Bounce Back

The UAE economic recovery is slow but steady and will eventually reach up to the pre-pandemic period. Though the recovery seems to be slow but it is much faster than the rest of the world. This will be a huge game changer for the second-largest economy in the world. It will make its place as a huge stronghold.

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