Expo 2020 Dubai to give a big boost to UAE economy
Dubai: Expo 2020 will give a one-time shot in the arm for the UAE economy, according to economists from Standard Chartered.
“We expect a one-off boost to growth from Dubai’s hosting Expo 2020. This should boost UAE GDP growth to 2.1 per cent from 1.7 per cent in 2019. We expect the hosting of Expo 2020 from October 2020 to April 2021 to lift UAE non-oil growth to 3 per cent driving the transitory pickup in headline growth,” said Bilal Khan, Senior Economist, Middle East North Africa and Pakistan (MENAP), Standard Chartered.
An estimated 25 million visitors, of which 70 per cent foreigners are expected to visit the UAE during the event giving a big push to demand that has been lagging for a while.
“The UAE needs further policy measures to boost domestic demand. In the past, fiscal policy measures have been largely focused on supply side and that worked well. Now with most infrastructure development and construction complete, the policy boost should come on the demand side. The recent policy changes such as changes in visa rules and business ownership are likely to support the demand side of the economy,” said Carla Slim, economist MENAP, Standard Chartered.
While the Standard Economists expect the Expo 2020 to boost domestic consumption, particularly in the retail and hospitality industries, which have struggled from overcapacity in recent years, they see no meaningful recovery for the property market in the near term. Residential property prices continue to decline in both Abu Dhabi and Dubai. Although the Dubai government recently formed a committee to balance property demand and supply, including by restricting competition between quasi-government and private firms, the impact on prices will depend on implementation.
“Policy action is an encouraging step, but a meaningful recovery in the sector appears unlikely in the near term given expectations of additional supply in the coming months,” said Khan.
The Purchasing Manager’s Index (PMI) data and anecdotal evidence suggest that the UAE economy has been facing downward pressure on prices. Standard Chartered economists expect this to ease in 2020.
“We expect CPI inflation to turn positive in 2020, partly due to the low base effect from 2019. Anecdotal evidence suggests that firms have been discounting prices to shore up demand for goods and services. Although a sustained recovery is not our base case, Expo should help to stabilise downward pressure on consumer prices by providing a one-off boost to demand,” said Khan.
While the interest rates are expected to remain stable through out 2020, no rate cuts by the Central Bank of UAE is anticipated. “We expect the Central Bank of the UAE (CBUAE) to keep the policy (repo) rate steady in 2020. We forecast the next repo rate cut by the CBUAE in 2021, in line with our Federal Reserve call,” said Khan.