transitioning to the new normal
TRANSCRIPT
© 2021 PwC. All rights reserved
27 April @ 3pm GST
Middle East updates
Transitioning to the new normal
Resources
PwC ME COVID-19 website -
prior webcasts, insights and resourceswww.pwc.com/me/covid-19
Digital Fitness for the WorldPwC’s upskilling contribution to the world in response to COVID-19.
Access our free Digital Fitness App available from the Apple App
store and Google Play store.
If registering with your personal email, use invite
code (LRNALL) to access today
PwC Middle East - Webcast Series - 27 April 2021
1Economic update
Richard BoxshallChief Economist
PwC Middle East
2‘Reinventing the Gulf Region: Putting local economies,
citizens and innovation first’ viewpoint
Dr Yahya AnoutiPartner
Strategy& Middle East
Agenda
PwC Middle East - Webcast Series - 27 April 2021
Dima SayessPartner
Strategy& Middle East
PwC Middle East - Webcast Series - 27 April 2021
$65
Source: IMF regional economic outlook MENAP - April 2021
8
https://www.strategyand.pwc.com/m1/en/reinventing-the-gulf-region
GCC governments should adapt to resolve five growing tensions along: “ADAPT”
AAsymmetry
DDisruption
AAge
PPolarization
TTrust
Source: Strategy&9
Growing
imbalances
put recovery
at risk
The speed,
scale, and
pervasive
nature of
technology
Demographic
pressures
continue to
build
The global
consensus
breaks down
as
nationalism
rises
Institutional
expectations
are on the
rise
Asymmetry: Growing imbalances put recovery at risk
AAsymmetry
DDisruption
AAge
PPolarization
TTrust
Exposure to
structural economic
challenges
SMEs struggling to
compete
Pressure on urban
infrastructure and
resources
The need for speed
in Industry 4.0
Dominance of
major tech players
Technology-
enabled, new ways
of living, working,
and consuming
Shift to preventive
and personalized
healthcare
Youth bulge and
employment
challenges
Aging population
and the looming
pension crisis
Jockeying among
superpowers
Global and regional
integration
challenges
“Slowbalization” and
localization
Citizen-centric,
platform
government
Transition to
sustainable, low-
carbon future
Integrated safety
and security
management
Source: Strategy&10
GCC Countries GDP growth rates, already slowing down prior to COVID-19[%, 2011-2019]
2014 2015 2016
1.0%
2018 2019-5.0%
14.0%
4.0%
0.0%
-1.0%
3.0%
8.0%
2.0%
7.0%
2011 2012
6.0%
5.0%
9.0%
2013 2017
KuwaitBahrain QatarOman Saudi Arabia United Arab Emirates
The GCC real GDP growth rates have been slowing down prior to the pandemic, and showed a 5.7% contraction in 2020
Source: World Bank
Exposure to structural economic challenges
• Structural challenges are hindered by:
- High expenditures, especially the wage bill
(above 10% of GDP compared to 5.4% global
average) and subsidies
- Narrow tax base
- Limited diversification
- Restrictive trade policies and low R&D
11
- 5.7%
2020
+1.7% +2.7%
2021 2022Rea
l G
DP
Gro
wth
Slower than global average
of 4% & 3.8%
Disruption: The speed, scale, and pervasive nature of technoloy
AAsymmetry
DDisruption
AAge
PPolarization
TTrust
Exposure to
structural economic
challenges
SMEs struggling to
compete
Pressure on urban
infrastructure and
resources
The need for speed
in Industry 4.0
Dominance of
major tech players
Technology-
enabled, new ways
of living, working,
and consuming
Shift to preventive
and personalized
healthcare
Youth bulge and
employment
challenges
Aging population
and the looming
pension crisis
Jockeying among
superpowers
Global and regional
integration
challenges
“Slowbalization” and
localization
Citizen-centric,
platform
government
Transition to
sustainable, low-
carbon future
Integrated safety
and security
management
Source: Strategy&12
A set of challenges should be mitigated to accelerate I4.0 adoption
Source: Strategy&13
Low level of familiarity
with I4.0 technologies
use-cases and
operational benefits
Lack of expertise in
estimating the economic
benefit of I4.0 technology
decreases industrial
players interests in its
roll-out
Limited availability of
local capabilities to drive
adoption and operations /
maintenance of I4.0
technology
UNCLEAR ECONOMIC BENEFITS2
LIMITED I4.0 TALENT POOL4
LIMITED AWARENESS OF I4.0 BENEFITS11 2 4
Limited availability of low
cost financing for SMEs
reduces attractiveness of
I4.0 technologies
business cases
HIGH FINANCING COST33
Age: Demographic pressure in the GCC continues to build
AAsymmetry
DDisruption
AAge
PPolarization
TTrust
Exposure to
structural economic
challenges
SMEs struggling to
compete
Pressure on urban
infrastructure and
resources
The need for speed
in Industry 4.0
Dominance of
major tech players
Technology-
enabled, new ways
of living, working,
and consuming
Shift to preventive
and personalized
healthcare
Youth bulge and
employment
challenges
Aging population
and the looming
pension crisis
Jockeying among
superpowers
Global and regional
integration
challenges
“Slowbalization” and
localization
Citizen-centric,
platform
government
Transition to
sustainable, low-
carbon future
Integrated safety
and security
management
Source: Strategy&14
30
16
12 12 118 7 7
0
5
10
15
20
25
30
35
40
45
50
55
U.S.CanadaSaudi
Arabia
OmanKuwait UAE BahrainSingapore
Youth unemploymentTotal unemployment
Percentage of youth unemployment and total unemployment
(% 2019)
• Youth unemployment is rooted in:
- Labor-market skills mismatch due to poor
alignment with education curricula
- High public sector employment
- Limited labor market flexibility
The GCC youth bulge could be a huge source of economic growth if the current unemployment challenges are addressed
Youth bulge and employment challenges
Source: World Bank15
GCC Youth Population
(age 15-29)
24%
GCC Youth
Unemployment
12% Female YU = 3
× more than
male YU
! Key Challenges
Polarization: The global consensus breaks down as nationalism rises
AAsymmetry
DDisruption
AAge
PPolarization
TTrust
Exposure to
structural economic
challenges
SMEs struggling to
compete
Pressure on urban
infrastructure and
resources
The need for speed
in Industry 4.0
Dominance of
major tech players
Technology-
enabled, new ways
of living, working,
and consuming
Shift to preventive
and personalized
healthcare
Youth bulge and
employment
challenges
Aging population
and the looming
pension crisis
Jockeying among
superpowers
Global and regional
integration
challenges
“Slowbalization” and
localization
Citizen-centric,
platform
government
Transition to
sustainable, low-
carbon future
Integrated safety
and security
management
Source: Strategy&16
• GCC is among regions with lowest FDI
globally (USD 21 billion in 2019); only
1.3% of global FDI
• GCC exports reduced by USD 59 billion in
2020
After decades of globalization, a shift toward regional and local economic activity is underway
“Slowbalization” and Localization
17
50
60
70
80
90
100
110
120
130
140
150
160
170
180
190
200
2013 2014 2015 2016 2017 2018 2019
%
Source: World Bank
United Arab Emirates Qatar
Bahrain
Kuwait
Saudi ArabiaOman
Reduction in GCC merchandise trade (% of GDP 2013-19)
World Trade (2020)
- 9%World FDI
(2020)
- 42%
Trust: Institutional expectations are on the rise
AAsymmetry
DDisruption
AAge
PPolarization
TTrust
Exposure to
structural economic
challenges
SMEs struggling to
compete
Pressure on urban
infrastructure and
resources
The need for speed
in Industry 4.0
Dominance of
major tech players
Technology-
enabled, new ways
of living, working,
and consuming
Shift to preventive
and personalized
healthcare
Youth bulge and
employment
challenges
Aging population
and the looming
pension crisis
Jockeying among
superpowers
Global and regional
integration
challenges
“Slowbalization” and
localization
Citizen-centric,
platform
government
Transition to
sustainable, low-
carbon future
Integrated safety
and security
management
Source: Strategy&18
LOCAL FIRST
CITIZENS FIRSTINNOVATION FIRST
GCC governments could adopt a holistic transformation agenda that hinges on three focus areas
Principal focus areas
19
Redefine economic growth models
Rethink institutionsAdopt a holistic, citizen-centric
approach
GCC governments could adopt new economic growth models
LOCAL FIRST
20
Define a new path to economic
diversification
Establish domestic value chains
Foster private sector competitiveness
Redesign the regional integration model
Competitive high-value added industries
Industry 4.0 in sectors
Test-bed for latest innovations
R&D investment
Local goods, essential for national security
GCC governments could adopt a holistic, citizen-centric approach
CITIZENS FIRST
21
Social safety nets
Social investment models
Hybrid pension schemes
Unified labor market
Design new social contracts
Boost labor market flexicurity and
productivity
Improve quality of life
Citizens' well-being, smart enabled
GCC governments could rethink institutions to put innovation first
INNOVATION FIRST
22
Seamless customer delivery (unique digital IDs)
Citizensco-designing solutions
Low pro-cyclical policies
Sectoral PPPs ESG application
Exploit the power of digital to offer personalized,
predictive, and proactive service delivery
Transition to participatory and agile
governance
Strengthen fiscal resilience
Adopt an integrated sustainability
agenda
23
https://www.strategyand.pwc.com/m1/en/reinventing-the-gulf-region
How would you rate your confidence levels at this current time?
PwC Middle East - Webcast Series - 27 April 2021
19 January
16 February
Quick poll:
23 March
Contact us
Stephen AndersonStrategy & Markets Leader
PwC Middle East
Strategy& Middle East
Dr Yahya AnoutiPartner, Energy,
Chemicals, and Utilities
Practice
PwC Middle East - Webcast Series - 27 April 2021
PwC Middle East
Richard BoxshallChief Economist
Dima SayessPartner, Government
and Public Sector
Practice
Strategy& Middle East
Thank you
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
Established in the Middle East for 40 years, PwC has 22 offices across 12 countries in the region with over 5,600 people. (www.pwc.com/me).
PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for
further details.
© 2021 PwC. All rights reserved