Covid-19 vaccines driving GCC economic recovery

“Vaccine rates have really been the key variable in people’s projections of the recovery across countries,” Silja Baller, insights lead at the Centre for the New Economy and Society at the World Economic Forum told Arabian Business.

The UAE’s population leads the world at 81 percent fully vaccinated, Qatar stands at 78 percent, and Bahrain has vaccinated 67 percent. Saudi Arabia has vaccinated half of its population, which is still above the global percentage, currently at around 30 percent.

“In the Middle East, Covid-19 seems to be contained due to vaccines and steady easing of restrictions,” said Scott Livermore, ICAEW economic advisor and chief economist at Oxford Economics. “And the risk of renewed lockdown in highly vaccinated countries is much lower compared to countries with lower vaccination rates.”

In the UAE, Covid-19 cases have been steadily declining over the last month, and the US has downgraded the Emirates’ travel warning, saying that vaccinated travellers can safely travel to the UAE. Britain similarly recently removed the UAE from its travel red list. Easing restrictions have translated to increased searches for flights between the UK and the UAE, where tourism is a major driver of the economy.

By 2027, tourism is expected to contribute 5.4 percent to the UAE’s GDP. The country’s economy is expected to grow by 2.4 percent this year and by 3.8 percent in 2022, the country’s central bank said.

The UAE, and Dubai in particular, are banking on Expo 2020 Dubai to drive tourists, businessmen, athletes and artists to the country. Postponed a year in the wake of the pandemic, Expo 2020 opens next month.

“[High vaccine rates] is particularly important for the UAE ahead of the delayed Expo 2020. Regional visitors, like those from Saudi and other parts of the Middle East will be critical for determining the early success or Expo 2020,” Livermore said.

Scott Livermore, ICAEW economic advisor and chief economist at Oxford Economics.

In early September, Saudi Arabia reopened its borders for citizens looking to travel to the UAE.

Saudi Arabia and Bahrain have their own plans, including developing infrastructure and drawing in high-profile sporting events, to develop their tourism sectors as the Gulf countries diversify their economies in preparation for a post-oil world.

Trade

Despite massive disruptions to global supply chain lines, which spurred calls for deglobalisation that emerged early in the pandemic as countries went into lockdown, supply chains recovered relatively quickly, Baller said.

While disruptions do still persist, “the jury’s still out about whether we’re really going to see deglobalisation”, she said. Until recently, the UAE’s status on the UK’s red list disrupted trade, ultimately hitting the bottom lines of businesses in the Emirates.

At the beginning of the pandemic, calls for more resilient, regionalised value chains echoed around the world.

Silja Baller, insights lead at the Centre for the New Economy and Society at World Economic Forum.

“This is something that’s not materialised,” Baller said. “Having parallel supply chains imposes quite a lot of costs for firms. So it seems for the moment, those costs are higher than then the benefits of creating greater resilience within their supply chains.”

Being shipped on those globalised supply chain lines are Covid-19 vaccines – some of which are manufactured in the UAE, where economic growth expectations have been revised up. There is hope economic growth will exceed 4 percent in 2021, a higher rate than the 2.5 percent the central bank predicted in December.

The global economic growth forecast is 6 percent in 2021, according to International Monetary Fund estimates.

“A lot of organisations revised their growth forecasts upwards in the first half of 2021, and this was also the case in the Middle East, largely because of the increasing availability of the vaccine,” Baller said.