UAE's Covid vaccine success will help lift most restrictions

The UAE’s Covid-19 vaccination programme is off to a great start and this rapid roll-out will help the country lift restrictions in the second quarter of this year. This will help expedite the economic recovery, experts have said.

They were referring to restrictions around social distancing, movement of people and others on businesses.

Capital Economics said Gulf economies that have taken a hit because of the Covid-19 pandemic will enjoy the largest “vaccine bounce”.

It said Dubai and the UAE are likely to be the “biggest beneficiary” due to easy access to vaccines.

“The UAE’s vaccination programme has got off to a strong start and, if this continues, it should allow for restrictions to be lifted in Q2. Combined with stronger oil output and the hosting of the World Expo, this will support a robust recovery this year,” said Jason Tuvey, senior emerging markets economist at Capital Economics.

“The UAE ranks among the best in the world in terms of the speed of its vaccination programme and will probably lift most restrictions at some point in Q2. The other Gulf countries are also in a good place to roll out vaccines quickly, although a reluctance among citizens in some countries to be vaccinated presents a hurdle,” Tuvey added.

Two types of vaccines are currently available to residents for free: China’s Sinopharm and America’s Pfizer-BioNTech. A third vaccine, Russia’s Sputnik V, has been approved for emergency use.

As on Saturday, January 23, the country’s health authorities have administered 2.42 million vaccine doses. Its current rate of doses of 24.54 per 100 people is the second highest globally, after Israel.

Encouraging forecasts

Economists said a rapid roll-out of Covid-19 vaccines, combined with rising oil production and higher oil prices, will support a quick recovery in other Gulf economies this year.

Khatija Haque, head of research and chief economist at Emirates NBD Research, said in a note that the outlook is brighter for the second half of 2021, particularly with Expo 2020 set to start in October 2021.

Though the UAE economy is expected to contract 6.9 per cent in 2020 largely due to the impact of the pandemic, there is reason for optimism.

“The bounce in the tourism sector at the end of last year suggests that a broader economic rebound could gain momentum once restrictions on activity and travel are eased. Depending on the rate at which Covid-19 vaccines are rolled out globally, that could happen from Q2 2021,” said Haque.

“Higher oil prices could allow the government to boost spending to support the economy, and a normalisation of activity is likely to boost demand for credit as well, particularly as interest rates are likely to remain low for an extended period. We expect the non-oil sector to grow 3.5 per cent in 2021, although headline growth is likely to be slower at 1.9 per cent due to the expected drag from the oil sector,” she added.

Outside Gulf

However, Tuvey noted that other non-oil exporting countries in the Middle East and North Africa are likely to take longer to recover their lost ground amid a slower roll-out of vaccines and tight fiscal policy.

Outside of the Gulf, a recovery in tourism receipts will support a narrowing of current account deficits and the recent pick-up in capital inflows is likely to be sustained, he added.

GDP growth is forecast to return in 2021, but Emirates NBD still expects that the region’s economy as a whole will be around one per cent below its pre-virus trend by end-2022.

In addition, other recent measures such as peace deals with Israel, the lifting of the blockade on Qatar and efforts to jumpstart the Iran nuclear deal mean that geopolitical tensions may continue to dissipate.

waheedabbas@khaleejtimes.com