The UAE is one of the best-placed countries in the world to lead the recovery from the Covid-19 pandemic. While sectors such as aviation and tourism remain deeply impacted, other key areas such as Dubai real estate and Abu Dhabi’s oil and gas projects sector are already returning to growth.
The UAE boasts the highest sovereign credit rating of any country in the region and has made the most progress on Covid-19 vaccination. It led the world throughout the pandemic in terms of the scaling-up of its testing infrastructure.
In October, the country will be further boosted when it opens the gates on Expo 2020 Dubai, which is set to symbolise the world’s return to business in the wake of the pandemic.
The IMF forecasts that the UAE’s GDP will rebound to 3.1 per cent real growth in 2021, after crashing by -5.9 per cent in 2020. And it projects 2.6 per cent real GDP growth in 2022.
Outlook for projects
The main caveat to the optimistic outlook for the UAE is the current weakness in projects market activity, which fell off markedly in 2020 and has remained subdued despite high expectations at the start of the year.
The slow return to project spending is to be expected. As a hub for travel, trade and business, as well as being one of the world’s biggest exporters of oil and gas, the UAE was doubly exposed to the economic fallout from the coronavirus pandemic.
The strain on government finances from the fall in oil revenues and tourism receipts, as well as the focus on supporting the healthcare sector, had a dramatic impact on the UAE’s projects industry as spending was shut off to all but the most important projects.
As a result, the value of project contract awards slumped 37 per cent to about $19bn of awards in 2020, compared to $30.5bn in 2019, and an average annual spend of $34bn a year every year since 2011.
Companies can expect to see a recovery in projects spending in the UAE in the final quarter of 2021 and throughout 2022 as confidence returns. The UAE has a pipeline of more than $500bn of planned projects, and many of them are strategically vital if the country is to achieve the diversification, investment and job creation objectives of its national visions. They must go ahead.
New approach, new opportunities
The challenge is finance. While the UAE is well-positioned to increase borrowing, or to draw from its national reserves, the fiscal legacy of the pandemic will force the authorities to keep a tight rein on spending. This will accelerate the shift to alternative models such as public private partnership (PPP).
Spending will be spurred by a number of new oil and gas projects in Abu Dhabi led by the multi-billion-dollar Hail & Ghasha sour gas programme. However, construction sector expenditure is expected to remain muted in 2021 and even beyond until demand begins to pick up and oversupply dwindles.
In this latest MEED Insight research report, MEED assesses the outlook for the UAE projects market in the wake of Covid-19 along with its history, policy, targets, sectors, key clients and contractors. The report highlights the opportunities for those working in the UAE and the drivers of investment plans.
UAE 2022 is a comprehensive guide for companies seeking to work in the UAE. Covering oil & gas, petrochemicals, power, construction, water, manufacturing and transport, the report will help you find opportunities, understand risks and set strategy in the UAE.