Onwards and upwards
Dubai economy is forecasted to grow by four per cent in 2021
Since the onset of the Covid-19 pandemic, Dubai has responded with swift and effective health measures and economic support initiatives that protected lives and livelihoods. This has enabled the emirate to contain the spread of the Covid-19 virus and its impact on the economy, and paved the way for a quick recovery.
Following the outbreak of the pandemic, Dubai Government stepped up its efforts in monitoring market conditions and communicating with the private sector and the broader community. The government adopted strong precautionary protocols to safeguard public health and ensure business continuity. This approach enabled a faster return to normal life and the resumption of economic activity in record time on the basis of real time data and analysis.
Sami Al Qamzi, director-general of Dubai Economy, said: "Our leadership's directives were focused on ensuring that the short-term impact of the Covid-19 pandemic does not translate into a long-term economic hardship that would inflict lasting damage on people and businesses by way of job losses and bankruptcies. This has paved the way for Dubai to be one of the very first cities to gradually reopen its markets and businesses."
Dubai Economic Outlook 2020-2021 during the period between March and October 2020, the Government of Dubai launched four stimulus packages with the objective of mitigating the impact of confinement measures in the emirate, on the demand side, covering consumption, investment, trade and travel, as well as on the supply side including the workforce, supply chains and the cost of doing business. The initiatives, worth around Dh6.8 billion, helped offset the shock and repercussions in the form of job losses or disruptions to businesses.
According to a recent study by Dubai Economy, Dubai's stimulus packages contributed to reducing the economic impact of the crisis by limiting the expected economic contraction to -6.2 per cent in 2020, a decline that is in line with the growth outlook of countries around the globe as reported by the International Monetary Fund.
The precautionary and preventive measures adopted to contain the Covid-19 pandemic in Dubai, along with travel restrictions around the world, had a severe impact on hotels and restaurants, which are expected to see a contraction of -20 per cent in 2020. Also affected were the transport and storage sector (-11 per cent), and the retail and wholesale trade sector (minus nine per cent).
The Government of Dubai and its Future Foresight project have laid strong foundations for a rapid recovery. The support measures launched during the pandemic were designed to contribute substantially to the ongoing economic recovery efforts.
"These efforts include investment in healthcare and food security that will not only reduce the likelihood of future shocks, but also contribute to enhancing the emirate's resilience against such shocks," said Al Qamzi.
The continued flow of local and foreign investments, whether from the government or private sector, are supporting the emirate's efforts in achieving sustainable growth and a rapid transition to a knowledge-based economy. The Cabinet Resolution No. (16) for the year 2020 issued last November listing a set of economic sectors and activities in which 100 per cent foreign ownership is allowed, supports efforts to attract FDI into the UAE.
Nasdaq Dubai Growth Market was launched in October 2020 to assist emerging companies and small and medium enterprises in attracting investors and financing their projects through an initial public offering (IPO). The move will support not only local businesses, but also companies from different parts of the world, enabling them to expand in the region and internationally.
Dubai also launched a 'Virtual Work Program' in October 2020, offering overseas' professionals the opportunity to work remotely using Dubai as a residential base so that they can benefit from its safe and high-quality working and living environment. The programme complements the golden visa for long-term residency permits launched in 2019 that allows foreigners to live, work and study in the UAE without the need for an Emirati sponsor and hold 100 per cent ownership of their businesses in the UAE. The golden visas can be issued for a period of five or 10 years and renewed automatically.
The ongoing initiatives, in addition to the Expo 2020 scheduled to be hosted next year, will drive increased investment inflows and job creation in the coming years. Al Qamzi also revealed the results of a recent study by Dubai Economy, which estimates growth to accelerate to 4 per cent in the emirate by 2021 taking into account prevailing conditions and the outlook for the global economy.
The economic impact of confinement measures in the first half of 2020 Preliminary reports issued by the Dubai Statistics Centre show a 10.8 per cent decline in the emirate's economy in the first six months of 2020.
Arif Al Muhairi, Executive Director of Dubai Statistics Centre, said this decline is within the expected range of economic contraction, given the massive global economic impact of the Covid-19 pandemic, especially in the first half of the year. The critical priority placed on combating the pandemic and protecting public health and safety induced a widespread slowdown. As with countries around the world, various confinement measures, such as curfews and closures of businesses, had a major impact on economic activities.
Productive activities (agriculture, mining, and industry), which are critical to securing the needs of residents and businesses, grew by one per cent in the first half of 2020. These sectors remained active under close monitoring and stringent observance of precautionary measures.
The government sector achieved a growth rate of 1.1 per cent in the first half of the year compared to the same period last year, contributing 5.4 per cent to the emirate's real GDP and pushing its economy up by 0.1 percentage point, as it continued spending on development projects. Total government spending grew by six per cent in H 2020 compared to the first half of the previous year.
Khatija Haque, Head of Research and Chief Economist, Emirates NBD, said: "Real GDP growth in developed markets largely exceeded expectations in Q4, indicating that economies are getting better with coping with the stresses induced by the Covid-19 pandemic crisis. This improving resilience could soften its impact on the current quarter also, although with Q1 lockdowns deeper and longer, the likelihood remains that the period will be quite weak.
"Looking ahead, the speed with which governments implement vaccination programmes will be a principal determinant of the pace of growth."
GCC budget deficits to remain substantial even as economic outlook improves. Higher oil prices and significant progress with Covid-19 vaccine rollouts support view that the outlook for the GCC economies this year is brighter. However, budget deficits are likely to remain substantial, limiting the scope for additional fiscal stimulus to support a recovery and resulting in more debt issuance from the region this year.
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