Economic growth remained unchanged at 1.7% in 2019 as the pick-up in the HC sector was offset by a slowdown in the rest of the economy. Official estimates suggest non-oil real GDP growth slowed to 0.3% in Q2 2019. The slowdown in real estate continues due to oversupply and associated debt overhang ¡ª average residential prices fell in Q4 2019 by 7-7.5% y/o/y in Dubai and Abu Dhabi.
Growth in 2020 is subject to major uncertainty due to the COVID-19 pandemic and low oil prices. Travel restrictions are hitting tourism, and social distancing will contract domestic consumption. Cognizant of these exposures, the authorities moved quickly to implement a containment strategy, cancel sporting events, and tighten travel procedures. Given the UAE¡¯s status as a global logistics and reprocessing hub, a global slowdown and disruptions in supply chains will weigh heavily on the UAE¡¯s non-oil sector, which was already facing persistently weak business sentiment and a prolonged real estate downturn.
Mitigating the economic fallout from COVID-19 is the UAE¡¯s immediate challenge given its impact on sectors into which the UAE had successfully diversified (through flight disruption, lower transit trade and tourism). Despite being relatively diversified compared to its GCC neighbors, the UAE remains dependent on regional oil-driven liquidity and is thus also vulnerable to the crash in oil prices.