REVIEWING 2020 AND LOOKING AHEAD TO THE “NEXT NORMAL” IN 2021
While 2020 was about unpredictability and change, 2021 will be about moving to the “next normal.” There were many influential global and domestic factors that affected the Middle East economy and the industries that we work in. Below I share my insights on some of the essential trends and opportunities for the year ahead.
2020 Global Trends
1. The Coronavirus Pandemic
The Coronavirus pandemic that began in February was the greatest economic impact of 2020 and continues to cast uncertainty onto the economy today, even with a vaccine’s release. Though the economic outlook is slowly recovering, it will not return to pre-crisis level until 2022. Although the crisis negatively affected many industries, it also allowed for many new opportunities in the Gulf region, including the digital transformation of several sectors and the clean energy sector's rise.
2. Reduction of Travel & Tourism
When the world shut down in the early months of 2020, so did one of the Gulf region’s largest sources of income, the hospitality sector. A year that was once thought to be the biggest year for the Emirates with Expo 2020, then saw the shuttering of countries and banning of travel. However, Dubai still found ways to bring expats back to the region with its new Golden Visa Program, eligible to certain professionals, specialised degree-holders, among others. This program is expected to increase economic growth by 1%, especially with the introduction of remote work due to the pandemic.
3. Fintech Open Banking
Following in the footsteps of the rest of the world, Bahrain and Dubai saw the introduction of open banking platforms over the past year and the adoption of fintech. Both allow for more collaboration between the banking industry and the innovative fintech industry, permitting more opportunities as the landscape evolves. Due to lockdowns and social distancing measures, many industries adopted new fintech platforms and digital payment services to accommodate to consumer needs and demand. As such, Dubai launched its first Nasdaq Growth Market for SMEs allowing for growth and innovation in the digital economy.
2020 Regional Trends
1. Harnessing the Power of Digital
After the approval of Sheikh Mohammed bin Rashid Al Maktoum’s digital economy action plan, the UAE began the push for digitization in the region. Utilizing digital across all major industries led to the creation of a resilient digital economy. This year’s Digital Intelligence Index sheds insights on key factors driving change and momentum and analyses what this means for economies during and after the pandemic. With the low price and oversupply in the oil industry, Saudi Arabia also saw a rise in digital transformation as it turned to new industries during the pandemic.
Digital transformation continues to accelerate, providing services to customers through digital channels, including e-commerce and other innovative touch-free delivery models. Automation has increased across industries, such as healthcare and retail, and social media's importance will continue to rise in B2C and B2B businesses. Moreover, consumer habits have changed as more people have spent less this past year, adapting to buy only necessities and shop online. However, with this wave of digital, consumer spending will return.
2. Wave of Bank Mergers
Bank consolidation has been a significant trend of the year. For example, large bank rivals Samba Financial Group and National Commercial Bank joined together to create the third-largest bank in the region. In the UAE, Dubai Islamic Bank and Noor Bank completed their merger earlier in the year. This wave allowed banks in the oil-rich Gulf to combine, as regional economies continue to suffer from the twin shocks of lower energy revenues and the global Coronavirus pandemic.
3. Oil & Gas
After the pandemic’s initial shock, the oil industry experienced shrinking demand and supply after a price war early in the year. OPEC, Russia, and other allies agreed to extend record oil production cuts until the end of July. However, the reduction in oil production caused a significant decrease for the Saudi Arabian economy. With oil supply levels exceeding demand, global prices dropped dramatically and have only recovered slightly. Going into the new year, Saudi Arabian oil partners have decided to pump less oil to manage supply and cuts.
4. Clean Energy and Vision 2030
From shareholders to stakeholders, the focus on financial profit has shifted towards community responsibilities. Sustainability has become increasingly important, as well as diversity and inclusion and giving back to the community. The region is on track to complete its target for Vision 2030, a goal of sole resilience on clean energy and the drive of economic growth through clean energy solutions. Dubai continued to work towards these efforts by introducing new business programs, such as Fuel & Engine Efficiency, Efficient Mobility, and Smart Charging, Recycled & Ground Water Demand Management, Consumer Behavior, Sustainable Building Projects, and the Green Building Code.
Looking Forward
As we look forward to 2021, we can expect to see many changes as companies are forced to adapt to the “next normal.” They will continue to restructure across all sectors, reevaluating how they do business in this new environment, while significant innovation and entrepreneurship trends that emerged from the past year will continue into 2021.
Whether by massive private investment, restructuring, or mergers and acquisitions, businesses are enhancing their operating models through digitization, automation, and normalizing working from home. Capable companies are focusing on investing in green technologies and becoming more asset-light by scaling costs, while non-performing companies that are unable to flex their models are liquidating and winding down.
Although the Middle East faced economic challenges during 2020, we have a lot to look forward to in 2021, including Expo 2020 and major stimulus projects to restart the economy. We hope to see the end of this global pandemic and the safe vaccination of all our residents. As we pivot safely to the next normal, we know that the way we work has fundamentally changed.
We have new behavioral patterns for how we work. There is no going back now that organizations went into survival mode. New business models for how we work came virtually overnight. We have witnessed whole industries learning that they must quickly pivot and adapt to survive in extreme environments. We all now know how essential digital has become to transform all sectors and keep us connected in business and home.
Therefore, traditional business models will have to evolve to keep pace. So, as we move forward, we expect to see continued focus on increased productivity, even more digital transformation across all sectors and industries. We believe that those who continue to evolve quickly will be able to capitalize on growth opportunities ahead.
To learn more about our Alvarez & Marsal Middle East Team: https://www.alvarezandmarsal.com
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· https://www.dhirubhai.net/posts/saeedajaffar_covid19-linkedinpoll-activity-6737371256624041984-j4CC