UAE is expected to experience a deeper contraction this year than predicted in May. Dubai’s economy could contract by at least 8.0 per cent because of its large exposure to tourism, aviation and other services make it more vulnerable to the effects of the pandemic. UAE should pursue a more diversified and knowledge-driven economy. Privatizing non-strategic GREs and enforcing competition laws and regulations would improve efficiency and raise productivity. Building a new and more diverse growth model would enable the country to leverage its pool of well-trained workers and its effective partnership between the public and private sectors.
Employment declined by about 10 per cent, affecting mostly expats, as firms were constrained by low cash flow and high expenses. The PMI rose to 51 points in September, signaling a renewed expansion in the private sector. The continued decline in housing costs has been a major drag on inflation, and we expect the average CPI to decline by 2.0 per cent in 2020. Real estate prices have been falling since late 2014 mainly due to oversupply, weaker consumer sentiment in the context of prolonged low oil prices, and recently Covid-19. Fall in oil prices and the associated reduction in Covid-19 led to deep recessions, widening fiscal deficits, shifting current account surpluses to large deficits and increasing financial stability risks. However, major GCC oil exporters are better off with large reserves.