Dubai economy forecast to grow by 4pc in 2021

News Desk

Dubai’s economic growth is expected to accelerate to 4 per cent in 2021 taking into account prevailing conditions and the outlook for the global economy, according to a report.

Sami Al Qamzi, Director General of Dubai Economy, in a recent interview to WAM said that 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 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,the report said.

During the period between March and October this year, 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 AED6.8 billion ($1.85 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% in 2020. Also affected were the transport and storage sector (-11 per cent), and the retail and wholesale trade sector (-9 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.

The Dubai Statistics Centre data also show that activities related to cross border transactions were the most impacted by the overall decline in H1 2020. These activities accounted for 85.4 per cent of the total decline and included sectors such as trade, transport, hospitality and food, which were severely hit by the closure of international borders and curbs on travel and tourism. Foreign trade also suffered as cargo movement was restricted by closure of borders and airports.

Trade, transport and storage in general saw a decline in H1 2020 compared to the same period with trade activity alone decreasing by 15.1 per cent. Despite the decline, trade remained the largest contributor to the emirate’s economy, with a 24 per cent share. The decline largely coincided with the gradual closure that began in mid-March and continued until June.

Transport and storage activity decreased by 28.3 per cent, pulling the emirate’s economy down by 3.6 percentage points, as flights and airports came to a standstill and broad demand for transport weakened during the National Disinfection Program and related closure. However, despite the decline, transport and storage activity made a substantially high contribution of 10.3 per cent to the emirate’s economy.

The Dubai Statistics Centre data also show a decrease of 34.6 per cent in activity in the hospitality and food services (hotels and restaurants) during H1 2020 compared to the same period in 2019. Though the decline pulled the Dubai economy down by 1.7 percentage points, the sector contributed 3.7 per cent to it.

Certain health-related activities witnessed a decline of 13.2 per cent in the first half of 2020, which can be attributed to changing healthcare priorities and suspension of specialised activities and services to focus on crisis management and counter-pandemic measures.

Real estate activities also witnessed a decline of 3.7 per cent. The sector contributed 8 per cent to real GDP and an added value of approximately AED15 billion in H1 2020. The drop in residential rental prices and margins achieved from the sale of real estate units were the major reasons for the decline.

Financial services and insurance activities saw a new phase of growth during the pandemic, growing 1.4 per cent and pushing the emirate’s overall economy positively by 0.1 percentage points. The sector also enhanced its contribution to the emirate’s economy to 11.5 per cent in the first half of 2020.