The Middle East Africa (MEA) region will gradually emerge from the challenges brought by COVID-19, growing at 4% YOY in 2021, up from a contraction of 4.3% YOY in 2020. While the Sub-Saharan Africa region includes some smaller markets that have been more insulated from the global economic and pandemic crisis of 2020, all major economies in MEA have seen significant disruptions to their economies. The recovery in 2021 will be very gradual; Q2 2021 should see some uptick in activity as COVID-19 restrictions are lifted and confidence and pent-up demand begins to return. However, a more substantial economic recovery is likely in late 2021, with most economies turning to their pre-pandemic levels of economic size in 2022. Scenario planning, close monitoring of financial risk and enhancements to the offering will be essential to outgrowing market conditions in 2021.
Our analysts are working to bring you our latest insights on the MEA region, preparing you for uncertainty, volatility, and uneven recovery throughout 2021. In this series, we do a deep dive into the key MEA markets that have the largest impact on your business so you can stay ahead of the curve this year. Check out our insights on Turkey healthcare, Nigeria, and Israel, and keep an eye on our LinkedIn page for even more insights through the end of January. Keep reading for more on our current view of the UAE’s economic activity in 2021.
Although the UAE has shown an organized and effective response to COVID-19, the country’s recovery will be dependent on global trade, tourism regulations, and FDI trends—all of which are out of the UAE’s control. Meanwhile, rising infection rates create a risk of returning restrictions and must be closely monitored by executives. Consumer confidence should stabilize and improve toward the middle of 2021; however, the total consumer base will remain significantly lower.
Israeli and Emirati authorities have increased activity to facilitate investment flows across the two countries, highlighting sectors such as fintech, health technologies, food security and agri-tech, tourism, pharmaceuticals as some key areas of investments. Companies involved in these sectors should monitor for opportunities and competition.
While the construction and industrial manufacturing sectors will remain muted until later this year, export-oriented essential consumer goods and basic medical device and generic pharmaceutical production will resume. Investments will pick up only gradually initially, while payment delays and price pressures will remain throughout the year. Businesses must revise their one- to three-year market size assumptions for the UAE, considering the lasting effects of 2020, increase targeted marketing efforts to resilient customer base, update to innovative product offerings, and use scenarios to ensure they are prepared for volatility.
The Central Bank of the UAE expects the country’s GDP to grow 3.6% by the end of 2021, largely in line with our expectations of an average 3.2% growth for the year. In an effort to support reaching this growth rate, the bank is extending its Targeted Economic Support Scheme until June 2021.
The UAE’s newly announced tourism strategy aims to revive the sector as vaccinations pave the way for more global travel in the second half of 2021. The initial campaign plans to launch a 45-day campaign to highlight numerous sites and activities across each Emirate and market the UAE as a single destination. B2C companies should monitor additional campaigns as well as global COVID-19 and vaccination progress to gauge tourist arrivals in 2021. We expect tourist arrivals to be at least 30% lower in Q2 2021 relative to 2019.
Israeli and Emirati authorities will also increase activity to facilitate investment flows, highlighting sectors such as fintech, health technologies, food security and agri-tech, tourism, and pharmaceuticals as some key areas of investments. Companies involved in these sectors should monitor for opportunities and competition.
For more on our outlook for the UAE in 2021, watch the full webinar presentation from Zeynep Kosereisoglu, Director for Middle East & Africa research.
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