hectic00 | iStock | Getty Images
DUBAI, United Arab Emirates – Dubai’s economy contracted 10.9% year-over-year in 2020, data from the Dubai Statistics Center revealed, reflecting a city hard hit by the coronavirus pandemic and halt to global travel.
Dubai, the commercial capital of the United Arab Emirates, is home to 3.4 million people and is heavily reliant on industries such as hospitality, tourism, retail and travel, which suffered dramatic blows worldwide in the first year of the pandemic.
The sectors hardest hit in Dubai last year were, unsurprisingly, the arts, entertainment and leisure sectors (-55%); Transport and storage (-35%); and accommodation and catering services (-33%).
But growth has skyrocketed this year, with data for the first quarter of this year showing an 11% increase over the previous quarter, despite a 3.7% year-over-year decrease.
Transportation and storage, and hotels and restaurants, also fell compared to Q1 2020 to weigh on headline growth as travel and tourism remained below pre-pandemic levels, but the two largest sectors of the economy – wholesale, retail and financial services – grew 2, 8% and 3.5% year-on-year.
A masked Israeli tourist in Dubai’s historic al-Fahidi district on January 11, 2021. As much of the world tightened lockdowns amid the COVID-19 coronavirus pandemic, Dubai remains open to tourism, branding itself as sunny, quarantine-free Escape – despite the sharp rise in cases.
KARIM SAHIB | AFP via Getty Images
Dubai led the way in reopening to tourism in July 2020 and was one of the first cities in the world to do so after a very strict lockdown that left people locked in their homes and only allowed to go with police permission. Nightlife and leisure activities resumed until late summer, with masks and social distancing in place as anti-Covid measures.
During the winter months, the emirate became a hotbed for tourists yearning for normalcy, but a spike in Covid infections through February led several countries, particularly the UK, to put the UAE on their no-travel lists.
The slow resumption of travel and the delayed lifting of travel bans in some countries have put major pressure on the recovery.
“We expect annual GDP growth to recover from the low year-on-year basis from the second quarter of 2021 onwards, but global travel restrictions have likely weighed on Dubai’s recovery in both the second quarter and, to a lesser extent, the third quarter,” analysts said in Dubai resident bank Emirates NBD in a note Monday. But “those travel restrictions have eased in recent weeks and we expect growth to accelerate in the fourth quarter,” the bank said.
Emirates NBD is forecasting 4% growth for the emirate this year. For the United Arab Emirates as a whole, she predicts “GDP growth for the entire UAE of 1.9% this year from -6.1% previously”.
With global travel increasing and one of the fastest vaccination campaigns in the world, the UAE is well positioned to see higher tourism numbers in the fourth quarter winter months, when warm weather and relaxed Covid restrictions will attract travelers from colder coasts. Dubai hopes that Expo 2020, its six-month mega-event that has been delayed by a year due to the pandemic, will become a major tourist draw.
Real estate recovery uneven
The real estate sector, which had been in decline for several years at the beginning of the pandemic, is experiencing a strong but uneven recovery – partly unevenly due to what many market observers criticize as overbuilding. Property supply versus demand has become clearer after the overseas majority of Dubai’s population fell 8.4% in 2020 due to the pandemic, the largest population decline in the Gulf region.
Housing prices in Dubai “are rebounding sharply from a record low in late 2020 – since peaking in 2014 – due to pent-up demand from both international and local buyers, improved investor and consumer sentiment, a recovery in oil and gas prices and a gradual macroeconomic recovery. which was supported in Dubai by high Covid-19 vaccination rates and new visa and company ownership rules, “analysts from S&P Global Ratings said in a report on Monday.
In fact, the emirate has introduced visa and business reforms designed to make it easier for foreigners to live, work, and fully own their businesses in Dubai without the need for a local partner.
“Dubai’s real estate sector is likely to benefit from World Expo 2020, which began at the end of October this year due to the pandemic,” the S&P analysts wrote. “But the structural oversupply of residential real estate will call price increases into question in the long term and make the recovery fragile.”