Now that the curtains have fallen over 2018, it is time to explore what 2019 has in store for the UAE.
Following a sluggish growth in 2018, due to the low growth of the oil sector, the UAE economy has a more prosperous outlook for 2019, according to the International Monetary Fund (IMF). Fuelled by higher oil prices and oil production, government spending and reforms aimed at promoting the private sector, the economy is expected to grow by 3.7% next year . These reforms include ten-year visas for professionals and investors with the aim of boosting competitiveness and economic growth, a 50 billion AED stimulus package and reduced license fees. The UAE Central Bank is even more optimistic than the IMF and projects a 4.2% growth in 2019, which they credit to ongoing reforms to stimulate growth, fiscal stimulus and the fact that the restrictions on Iran will not have any material impact on the UAE’s economy. The main contributor is the non-oil sector, which accounts for 77% of the economy. Inflation meanwhile is expected to fall to 3.6% by the end of the year, following the 5% VAT introduction, twelve months earlier . The IMF maintains a positive economic outlook for the UAE as the growth is expected to continue over the next few years. The fiscal deficit of 1.6% of the GDP this year is set to turn to a surplus in 2019, while the current account surplus will be in excess of 7% by the end of 2018 .
With Expo2020 moving closer, the real estate sector is projected to exceed the performance of 2018 . Dubai property prices fell by 7.4% in 2018 due to an excess of supply, relative to slower demand. Contributing factors to growth are ongoing infrastructure developments and a significant investor’s appetite coming from China. Real estate prices are projected to grow steadily and the return of investment of properties is expected to be between five and eight per cent. However, the market will continue to be a buyer’s market in 2019 .
Information and Communication Technology
The outlook of the IT sector in the UAE looks bright. Organisations will increasingly be looking to integrate technology in their operations as a means to optimize their businesses. Cloud solutions, cyber security, self-service technologies, mobile applications and technologies are expected to be the key trends for 2019 . Digital disruption signified the greatest change in the past decade and the accelerating growth of technology continues . With it, it has created a growing demand for specialized staff to develop, implement, maintain and operate technologies that enable companies to remain innovative, efficient, responsive and competitive.
According to rating agency Moody’s Investors Service, weakening, yet solid lending, strong capital and better operating conditions drive a positive outlook for the UAE banking sector. Expo 2020, the attraction of foreign investment, government spending to boost growth, the non-oil GDP, tourism and job creations, the streamlining of business procedures and the current level of oil prices will encourage the recovery of the bank’s credit growth. Due to a slumped property prices in 2018, banks’ lending to the real estate and construction sector will increase. Banks have maintained efficiency to counterbalance the slowing economy; however, consolidation would decrease competition and improve scale economies. The pressure on profitability is projected to be somewhat alleviated, with net income to tangible assets remaining at around 1.5% to 2.1%. As macroeconomic conditions are improving, demand for credit will grow in accordance, resulting in a stronger performance .
Hospitality and Retail
The prospects for the UAE hospitality industry look exceedingly rosy. A report by Alpen Capital revealed that the hospitality sector in the UAE is expected to grow at a CAGR of 8.5% between 2017 and 2022 to reach $7.6 billion by 2022, During the same period, tourist visits are set to grow at a CAGR of 4.3% to 25.5 million, whereas the supply of hotel rooms to accommodate these visitors is expected to grow at a CAGR of 6% to nearly 200,000 rooms, of which 132,000 will be ready in 2019. The industry has the support of the government which is encouraging tourism by introducing new destinations, such as IMG Worlds of Adventure, the Louvre Abu Dhabi, and Dubai Parks and Resorts, developing new projects and offering VAT exemptions to tourists. Developments and actions like these ensure a steady leisure industry for the next decade .
The VAT that was introduced exactly a year ago initially caused a slump in retail sales. Twelve months later, however, consumers have grown accustomed to the tax and sales have recovered in accordance. Research by the Dubai Chamber of Commerce revealed that the UAE’s retail sector is set to grow at a CAGR of 4.9%. Euromonitor International confirms the expansion of the retail sector and projects the UAE’s retail sales to hit 71 billion USD by 2021. Data from Linkedin revealed that the retail and hospitality sectors have been the fastest growing sectors in the UAE for the past 15 years. Dubai housed 49% of all the countries’ shopping malls, followed by Abu Dhabi, which ranked second with a penetration of 36%. Given the affinity UAE residents have for shopping, it is no surprise that the A.T. Kearney Global Retail Development Index found that the UAE ranked fifth of the developing countries in terms for retail expansion .
Defense and Aerospace
Ministry of Finance officials have announced that the UAE will increase its defense spending by 41% to in 2019 . Defense spending by GCC countries will also set to be raised over the next five years, driven by their involvement in the conflicts in Yemen, Iraq and Syria. Another contributing factor includes the blockade of Qatar as allegations over Doha’s support for terrorism sparked defense procurement .
The aerospace industry foresees turbulence due to currency volatility, oil price fluctuations, intense competition and escalating trade tensions. Despite these anticipations, the sector maintains a positive outlook, as the demand for travel remains steady and resilient. The industry focuses on cost efficiency, growing fleets and expansion to new markets. The International Air Travel Association stated that Middle east airlines’ annual earnings are projected to increase by a third in 2019 to 2.93 billion AED, up from 2.20 billion AED in 2018. A key driver for the growth is improved traffic between the USA and the Middle East, after the USA’ ban on electronic devices and passengers from Muslim countries .
Oil and Gas
The revenue growth of Middle eastern oilfield services companies is expected to grow by 7% in 2019. Following the recovery of oil prices, operators have gained confidence to support production increases in the future. As a result, the deployment of capital, operations and the development of facilities is expected to expand. Investments to boost production capacity are exemplified by the Abu Dhabi national Oil Company (Adnoc) which is set to invest $109 billion over a four-year period, the Kuwait Petroleum Corporation which is increasing spending and Saudi Aramco, which is heavily investing in new developments. Likewise, Al Mansoori Specialised Engineering and Great Waters Maritime are expecting to announce new projects in the nearby future. In the past few years, the oil industry was heavily affected by the collapse in oil prices. However, oil prices have been recovering due to stable demand, geopolitical tensions in the region, the USA’s withdrawal from the Iran nuclear agreement and the production cut agreement between OPEC and non-OPEC members. As a result, oil companies are heavily recruiting as earnings rise .
In the era of technological disruption it is hardly surprising that tech-savvy talent will be in hot demand in 2019. As machine learning, digitalization, robotics and artificial intelligence are increasingly implemented in a variety of industries, there is a need for specialized human capital to enable companies to evolve in alignment with the market. This results in more job opportunities and more competitive salaries . In overall, wages are expected to increase by 4.8% in 2019. The strongest pay-hikes will come from non-energy sectors, consumer and high-tech companies and life sciences industries, as the UAE is diversifying its economy to reduce its reliance on the oil sector. This will give rise to new trends regarding hiring, retention and compensation. The outlook of the labour market is positive as 50% of UAE companies is looking to attract more talent. At the same time, companies expect increasing competition when it comes down to finding talent. Finally, nationalization is by many recognized as one of the key recruiting trends that 2019 will bring .
The trends and developments that are projected for 2019, signify growth and changes that will be reflected in the demand for human capital. Executive Solutions has over a decade of specialized experience in the Middle East with a focus on the oil and gas industry, corporate and professional services, information technology and communications, banking and financial services, healthcare, retail and hospitality, and aerospace and defense. With an extensive network, a firm foothold in the market and access to a sizeable talent pool, it is ideally positioned to help companies meet staffing demands and offer support. Executive Solutions provides solutions tailored to organisation’s needs, including executive search, overseas recruitment campaigns, recruitment process outsourcing, contingent project solutions, managed recruitment campaigns, contingency recruitment, master vendor solutions, nationalization and more. We listen, we act, we deliver. Simple.
To find out what we can do for you, please get in touch!
00971 4448 9700