Next year, the GCC region will be in focus because of several major global events, including Expo in Dubai, which opens on 20 October 2020 and runs for nearly six months, and the G20 summit in Riyadh on 21-22 November 2020. In different ways, the two events will showcase the region’s economic development and potential and could contribute to ongoing efforts to attract investments and diversify economies. The GCC’s location in a geopolitically sensitive region means it is often in the news, but these events could allow it to present a different side to key audiences.
The Expo in Dubai will be the first time that the Middle East region has hosted a World Expo, part of a series of exhibitions showcasing national cultures and human progress that began back in 1851 and are now scheduled every five years. Ongoing preparations include the government’s spending on infrastructure for the Expo site itself and private sector investments to expand accommodation capacity. This has been providing a boost to the construction sector, although about 80% of the work has already been completed.
During the event itself, the economic impact will come largely from spending by the influx of visitors. Dubai already hosted 15.9m tourists in 2018, making it the fourth most-visited city globally according to Mastercard’s Destination Cities Index. We forecast that the surge of visitors for Expo should result in it advancing to become the second most-visited city during 2020-21, reaching 23 million visitors in 2021.
This is based on official forecasts for about 11m additional tourists coming for Expo, which we assume are distributed evenly across the six months of the event, and underlying growth trends for the remainder of each year. If numbers exceed expectations, or if tourism growth is slower in Bangkok, which currently is the most-visited, then Dubai might even move into first place.
The key challenge for Dubai will be to convert the enthusiasm generated by Expo into longer-term gains. There will be an inevitable lull after the event, as visitor numbers decrease and tens of thousands of temporary expatriate staff hired for the event depart. However, the investment in the Expo site will continue to have an impact as it converts into a mixed-used development anchored by the Dubai Exhibition Centre, which will continue to host major events and is forecast to attract 1.1m foreign visitors a year.
The hope is that many of the newcomers who attend Expo will like what they see and become regular visitors to Dubai. Its central hub location on intercontinental transit routes, and the very high satisfaction results found in the Dubai International Visitors Survey, support that outcome. Dubai’s economic model also harnesses tourists as investors, particularly in real estate, and most Expo visitors are expected to be relatively affluent and in turn, potential investors who might be attracted by the current cyclical downturn in real estate prices, resulting from significant new supply.
When the annual G20 meeting arrives in Riyadh in November 2020, it will be the first time the Middle East has hosted such a large gathering of global leaders. While Expo focuses on global culture and technology, the G20 is the leading forum for global economic policy. Its membership includes countries accounting for 90% of the world’s GDP and two-thirds of global population. It was founded in 1999 in an effort to expand the G7 club of large developed economies to include broader representation by adding 12 other large economies and the European Union. Saudi Arabia has an important role as the only Arab state and the only OPEC member in the group. Since the global financial crisis in 2008, the G20 has taken over the baton from the G7 as the most important annual gathering.
In hosting the 15th G20 summit, Saudi Arabia will be able to frame some of the topics discussed by the world leaders and work to mediate agreements, and its secretariat is currently preparing an agenda. This will also be shaped by whatever key economic and political events are underway at the time, which are difficult to predict. However, we can expect that trade and climate change, both issues on which Saudi Arabia has an important perspective, will continue to be prominent. The summit will also happen two weeks after the US presidential election, the result of which could have a significant impact on the G20 discussions. In any case, Donald Trump, a close ally of Saudi Arabia, will represent the US at the G20, as the US presidential inauguration won’t take place until January 2021.
The summit could also be happening at a time when OPEC and its partners (including G20 member Russia) may be debating whether to extend oil production cuts into 2021. In June, the Russian president and the Saudi crown prince met on the sidelines of this year’s G20 in Japan, agreeing to continue oil cooperation, and a few days later the OPEC+ group formally agreed to extend cuts to March 2020. Many oil sector analysts expect that they will be extended for a further nine month period to end-2020, depending on trends in the global economy and oil market, in which case a decision to end the cuts, after four years, or continue in some form into 2021 could be pending when the G20 meets in Riyadh.
Aside from the core discussion, the summit will also provide a spotlight on Saudi Arabia itself. It comes as the Kingdom nears the end of its National Transformation Program, the first medium-term plan to set quantitative and ambitious goals for economic reform and diversification, as part of the broader Vision 2030. Significantly, it will also be happening around the time that Saudi officials have indicated the Aramco IPO is likely to take place and also when the first phase of NEOM city should be complete. Two key elements of the Kingdom’s broader diversification strategy. The attention resulting from the G20 could be harnessed to attract interest in both portfolio and direct investment in Saudi, which will be vital if it is to achieve its objectives.
Middle East Senior Partner, PwC Middle East
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Clients and Markets Leader, PwC Middle East
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Middle East Senior Economist, PwC Middle East
Tel: +971 4 304 3100