DUBAI- Dubai is set for a "modest" recovery this year on the back of a high vaccination rate in the United Arab Emirates and limited COVID-19 restrictions, but weak international tourism will drag on the economy until late 2022, S&P Global Ratings said.
The economy of the Middle East trade, finance, and tourism hub shrank 10.9% last year, with the coronavirus-driven drop in tourism contributing to 56% of the overall decline, the ratings agency said in a report on Tuesday.
"Tourism's contribution to real GDP fell to about 13% in 2020, from 18% in 2019. A further 30% of the 10.9% decline in 2020 came from the wholesale and retail trade sectors," it said.
S&P expects Dubai's economy to expand by 3.5% this year, mainly because of a high vaccination rate - with more than 85% of the UAE population having received two doses - and the easing of COVID-19 global restrictions.
The Dubai Expo 2020 world fair, which was delayed by a year because of the pandemic and started this month, is seen providing a weaker boost to the economy than that expected pre-COVID, said the agency.
"We forecast visitor arrivals to Dubai will not return to 2019 levels until at least late 2022. However, in our view, the six-month event will improve hotel occupancy and increase footfall in malls, benefitting the retail sector."
S&P expects Dubai's real gross domestic product growth to average about 2% between 2022 and 2024.
(Reporting by Davide Barbuscia Editing by David Goodman, Kirsten Donovan) ((Davide.Barbuscia@thomsonreuters.com; +971522604297; Reuters Messaging: firstname.lastname@example.org))