By Sam Bridge
ICAEW, the accountancy and finance body, says Expo is forecast to contribute up to 1.5% of the UAE's overall GDP in 2020
The outlook for the UAE’s economy remains promising, with economic growth expected to accelerate from an estimated 1.9 percent in 2019 to around 2.2 percent in 2020, according to new research.
ICAEW, the accountancy and finance body, said that Expo 2020 Dubai is expected to boost UAE's non-oil GDP growth to about 2.8 percent.
Its Economic Update: Middle East Q4 2019 reported, produced in partnership with Oxford Economics, said Expo 2020 Dubai, which is anticipated to attract 25 million visitors, is forecast to contribute up to 1.5 percent of the UAE’s overall GDP in 2020.
The report added that relevant authorities have stepped in to support non-oil activities in the country. Both Abu Dhabi and Dubai are implementing fiscal packages, while the recent interest rate cut by the US Federal Reserve, which the UAE Central Bank followed given the dollar peg, should support private sector credit growth.
However, these measures are yet to have a significant impact on the UAE's non-oil activity, ICAEW noted.
According to ICAEW, the expansion in non-oil activity is slowly beginning to translate into stronger job creation, although at a modest rate. Total employment in the private sector increased by 1 percent year on year in Q2, up from just 0.1 percent year on year in Q1.
While total employment increased in some sectors, including tourism and real estate, it declined in others, including construction, services and manufacturing.
Nonetheless, despite some pick-up in real estate transactions and employment, residential home sales prices continue to slide in both Abu Dhabi and Dubai.
The ICAEW report said market conditions are unlikely to see much of a rebound in the remainder of 2019 and the first half of 2020, reflecting expected strong supply growth and continued subdued demand.
ICAEW also said that although the legacy of Expo 2020 is hard to estimate, the investment climate remains positive with infrastructure upgrades.
Michael Armstrong, ICAEW regional director for the Middle East, Africa and South Asia (MEASA), said: “2019 has been a challenging year for Middle Eastern economies, due to geopolitical tensions, OPEC-led oil output cuts and ongoing weakness in the non-oil sector. However, despite lower oil prices this year, we are pleased to see signs of pick-up in the non-oil economy, supported by government spending.
“We believe there is plenty of room for improvement. To achieve a more diverse and sustainable economy, regional governments must remain proactive in implementing the necessary fiscal reforms aimed at achieving economic diversification, and continue to support their economies with pro-growth initiatives.”