World Bank revises UAE GDP growth to 2.4% in 2022

The World Bank has revised slightly downward its economic growth forecast for the UAE to 2.4 per cent in 2022, hinting the recovery would be subdued after a contraction of 6.3 per cent in 2020 and a 1.0 per cent surge projected for this year.

In its October, 2020 forecast, the Washington-based institution predicted that the UAE, Arab world’s second largest economy would record a gross domestic product (GDP) rebound of 2.5 per cent in 2022.

The bank in its January 2021 Global Economic Prospects said while the global economy is expected to expand 4.0 per cent in 2021, “assuming an initial Covid-19 vaccine rollout becomes widespread throughout the year,” economic activity in the Middle East and North Africa is forecast to recover modestly to 2.1 per cent in 2021, “reflecting the lasting damage from the pandemic and low oil prices.”

Saudi Arabia is on track to record 2.2 per cent growth in 2022 after recovering from a 5.4 per cent contraction in 2020 followed by an expected 2.0 per cent increase in 2021.

Other GCC economies are also on a comeback track, with the Kuwaiti GDP forecast to post 0.5 per cent rise in 2021 followed by a 3.1 per cent jump in 2022. Oman is forecast to record the most spectacular rebound with a growth of 7.9 per cent in 2022 after slightly recovering in 2021 from a 9.4 per cent contraction in 2020, while Qatar will record a 3.0 per cent growth both in 2021 and 2022 after a2.0 per cent shrinkage in 2020. Bahrain is also projected to grow by 2.2 per cent and 2.5 per cent respectively in 2021 and 2022 after last year’s minus 5.2 per cent GDP performance.

The bank said, across the Mena region the recovery will likely be subdued, unless policy makers move decisively to tame the pandemic and implement investment-enhancing reforms.

In its earlier forecast, the World Bank said the UAE’s economy’s contraction in 2020 was due to the disrupted engines of growth from Covid-19 pandemic containment efforts, Opec+ oil production cuts, lower oil prices, reduced global oil demand, and disruption in global supply chains. “The government continues to provide mitigation support in response to the pandemic as businesses strive to recover, worsening the consolidated fiscal deficit. The medium-term non-hydrocarbon outlook remains uncertain and hinges on a rebound in tourism and trade following a global recovery.”

In the wake of Covid-19, the UAE authorities aggressively implemented a containment strategy with strict lockdowns, postponed major events such as World Expo2020, imposed social distancing, and large-scale testing, the bank noted.

In the Mena region, growth among oil exporters is expected to recover to 1.8 per cent this year, supported by normalizing oil demand, the scheduled easing of the OPEC+ oil production cuts, policy support, and the gradual phasing out of domestic pandemic-related restrictions, the bank noted.

In Saudi Arabia, activity will be supported by a resumption of public capital investment projects postponed during the pandemic and a recovery of demand after the sharp rise of the value added tax.

The global apex bank said a downturn in oil prices, excessive volatility, or an extension of the Opec+ oil production cuts could hinder growth in oil-exporting emerging market and developing economies in the region. Oil importers could also be affected by a downturn in oil prices through lower remittances and a decline in foreign direct investment from oil exporting countries in the region. — issacjohn@khaleejtimes.com