Economic Outlook: What industry leaders (you) need to know

What’s the economic outlook in light of the ongoing pandemic crisis, slowing economic growth and geopolitical changes? Has the economic crisis reached the bottom yet? In which countries and sectors is China investing? Will we see a trade war between China and U.S. despite a new presidential administration?

Dr. Florence Eid-Oakden, CEO & Chief Economist at Arabia Monitor Research & Strategy, offered answers to these questions during a keynote at the #UFICongress. She provided key data to help industry leaders plan for the year ahead. Here’s what you need to know:

Global GDP plummets into negative territory after nine years of growth. From 2010 to 2019, global GDP posted 3% or higher growth annually. In 2020, global GDP took a deep dive with a V-shaped curve, due to the pandemic, said Eid-Oakden. It will end the year down (-4%).

Expect two years of zero growth. “In the best of circumstances, we are looking at two years of zero growth,” she said. “If forecasts are correct, we could see recovery growth of 5%.”

Biggest economic losers in 2020. The biggest economic contractions were the highest in India (-10.3%), followed by the U.K (-8%) and Mexico (-9.0%). The Middle East/North Africa (MENA) region declined (-5.0%), more severe than the average for emerging markets overall (-3.3). Advanced economies declined at a faster pace (-5.8%) than emerging markets.

Debt-to-GDP ratios rise. For advanced economies, the debt-to-GDP ratio was 76.7% in 2019. That number is expected to reach 96.1% in 2020 and go even higher in 2021 at 96.4%. In the Gulf Cooperation Council, which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the U.A.E., the debt-to-GDP ratio was 30.4%% in 2019, but it will rise to 41.4% in 2020 and 43.0% in 2021.

Growth rates soar for e-commerce revenues. “It’s one of the silver linings of the pandemic,” she said. The annual growth rate (AGR) of e-commerce revenues from 2020-2024 is expected to rise the fastest in these countries: Egypt (27.3%), U.A.E. (16.2%), India (13.1%) and Russia (6.9%).

Tech disruption accelerates economic diversification. By 2030, the AI contribution to GDP is projected to be highest in China, making up 26.1% of the countries total GDP, followed by North America (14.5%). In the MENA region, the highest percentages of AI contribution to GDP are expected in the U.A.E. (13.6%), Saudi Arabia (12.4%) and Egypt (7.7%)

Stagflation worse in MENA than other parts of the world. In 2020, inflation will rise to 9.3% in MENA, compared with 3.5% in the U.S., 2.9% in China, 0.4% on Europe.

Trade war continues between U.S. and China. “Competition between these countries is here to stay,” she said.

Looking ahead: China is expected to spend nearly $300 billion in foreign direct investments in 2020, up from $34 billion in 2007 and $126 billion in 2017. “We are at the dawn of a new century dominated by Asia, lead by China,” she predicted. “Between 2007 and 2017, we saw a 700% increase in foreign direct investment in MENA. In the region, China is investing in telecom, tech, education, healthcare, real estate, hospitality and banking.”

 

 

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