What Will the UAE Economy Look Like in 2021

What Will the UAE Economy Look Like in 2021?

The COVID-19 pandemic has resulted in a shrinkage of the United Arab Emirates economy, one of the largest economies in the Middle East. The entire Middle East economy has faced a contraction of around 6.6%

The future of the Middle East economy, however, may look better. These are some Middle East economy forecasts according to experts. 

Middle East Projected Growth

Experts have projected that the Middle East will grow by around 2.6% in 2021, according to the IMF. The growth, however, will be gradual and will likely begin to take hold in the second half of the year. 

For the UAE, different sectors will be responsible for boosting the economy. To find out more, click here

Lifting of Political and Economic Blockade of Qatar

The 41st Gulf Cooperation Council (GCC) summit at the beginning of 2021 resulted in the lifting of Qatar’s political and economic blockade. This signaled an overall move towards reconciliation in the region. 

The ability to cross borders and engage in trade with Qatar will provide a greater potential for economic growth. Qatar’s Financial Centre is also aiming to attract $25 billion of foreign direct investment by 2022.

This goal has the capacity to jumpstart its economy. The sectors that will likely see a spike in growth are the airline industry, the manufacturing industry, and the food production industry. 

Vaccine Rollouts

Due to the threat of the pandemic, the exact extent of economic recovery in the region will depend on the ability of the governments to employ suitable vaccine strategies. A possible hindrance is the inequality within the region.

For instance, a country such as the UAE will be able to vaccinate a significant portion of its population. Poorer countries will not be able to. This means that the Middle East economy may have an unbalanced economic recovery. 

Fiscal Stimulus

Fiscal policy support can help boost economies in the Middle East throughout 2021. At the same time, the IMF projects that fiscal deficits will be lower than in 2020, which is advantageous for the economy overall.

Stimulating economies with fiscal policies will likely have a spillover effect. Other countries may experience an improvement in economic growth as a result of increased international trade. 

With the projection that the private sector will see an increase in revenues and that households will experience a rise in expenditure, fiscal deficits may decrease. 

Middle East Economy in 2021

In 2021, the UAE economy and the Middle East economy are likely to experience more gradual growth. The end to Qatar’s blockade, vaccine rollouts, and fiscal policies will likely influence this recovery.

The downside is that some countries in the Middle East may experience more growth than others, especially as a result of their vaccine strategies. With some countries still having difficulty in securing a sizable stockpile of vaccines, the richer countries may experience more recovery than the poorer countries in the region. 

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Christophe Rude
Christophe Rude
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