Government policies, Expo 2020 spending to boost UAE economic growth

As political instability and trade tensions continue to dominate (and darken) global skies, the UAE’s growth is expected to gain momentum on the back of strong spending measures, diversification efforts and ongoing fiscal policies, a new report from UBS Global Wealth Management has found.

“The UAE economy is on a slow recovery path from the 2014–2017 oil shock, and significant fiscal buffers remain in place,” said Niels Zilkens, lead market head, Arabian Gulf & NRI.

“Headwinds will persist this year and next due to lingering trade tensions, the global economic slowdown, low energy prices, OPEC-led production cuts, and tensions with Iran. Growth should, however, pick up somewhat thanks to the ongoing fiscal stimulus measures, spending related to hosting Dubai Expo 2020, rate cuts in line with the Federal Reserve, and continuing diversification efforts.”

The overall report found that the global economy, in the report’s base case, is expected to grow 3 per cent in 2020, down slightly from 3.1 per cent in 2019. Developed market growth will decelerate from 1.6 per cent to 1.1 per cent, while emerging market growth will grow from 4.2 per cent to 4.6 per cent.

Polarised political choices render the 2020 outlook fairly capricious, but innovation driven by technology and sustainability will reveal winners and non-starters over the decade ahead, the report found.

Across the 2020s, investors will also see the world change as around 790 million people will move to cities. Workforces will attenuate by 25 million in developed economies and scale by 470 million in emerging ones. Internet users will soar from 4.3 billion to 7.5 billion. However, sustainability and technology challenges related to such factors offer opportunities, according to the report.

Mark Haefele, chief investment officer at UBS Global Wealth Management, said: “Elections, trade tensions and a shifting monetary and fiscal policy mix are likely to define a ‘year of choices’ in 2020. However, investors should also look beyond the next 12 months to a ‘decade of transformation’ where new winners and losers could change how investors allocate capital.”

In its base case for 2020, UBS GWM key growth forecasts are as follows:

Country	2019	2020
US	2.2%	1.1%
Brazil	0.9%	2.5%
Germany	0.5%	0.6%
France	1.3%	1%
Italy	0.2%	0.4%
Spain	2%	1.7%
UK	1.2%	0.9%
Switzerland	0.7%	0.9%
Russia	1%	1.8%
China	6.1%	5.7%
Japan	0.5%	0.6%
India	5.9%	6.5%