On the 29th of January, UAE confirms its first known case of COVID - 19. The first cases include a family of four who arrived from Wuhan. The country further proceeds to suspend all flights from China, Iran, and Thailand.
Soon, the economy began its rapid downturn, and unemployment soared. The situation took a turn for the worse when a sizeable number of the country’s expatriates began to leave. By the end of June, several companies report staggering losses and bankruptcy. CNBC predicts that 70% of companies might close their doors in the next six months.
Dubai: A Diverse Economy
The primary reason for this is that Dubai has one of the most diversified and non-oil dependent economies in the Gulf and relies on entertainment, hospitality, logistics, tourism, property, and retail. The second reason is that the Emirate depends on its 80% expatriate population for its economic activity. If these expatriates can no longer find work, they will return to their home countries. This population contraction will severely deplete the Emirate’s consumer base needed to enable any economic recovery. Over 150,000 Indian nationals and 40,000 Pakistani nationals have already left or registered to leave the UAE by the end of May.
“I so far think we’re looking at a minimum population contraction of 10% for the year,” Nasser al-Shaikh, former Director-General of the Dubai government’s finance department, tweeted in early June.
A Government Economic Bailout Package
To curb further losses, the Dubai government announced an economic stimulus of 1.5 billion dirhams ($408 million) to enhance liquidity and cushion the blow of virus lockdowns. The financial package also includes a list of fee refunds, reductions, and reduced utility costs.
The UAE’s central bank also deployed a $70 billion fiscal package to help commercial banks provide debt relief to small and medium companies. But many businesses still need added support and are hesitant to take on new debt due to the uncertain outlook for recovery.
Along with the rest of the country, the government of Dubai imposed two months of grueling lockdown. The lockdown measures imposed are said to be some of the strictest in the world. Residents of Dubai were required to apply for police permission to leave their homes.
Post-COVID Economic Recovery
Its seven months since the first COVID 19 case in the city, and the economy sees a new light in the non-oil sector. However, the improvement is still accompanied by continuing job losses and a weak outlook among businesses, according to London based global information provider IHS Markit. David Owen, an economist at IHS Markit, further reports, “July PMI data for the Dubai non-oil private sector, signaled the start of a post-COVID-19 recovery.”
Since the lift of lockdown restrictions at the beginning of Ramadan, foreign visitors throng Dubai’s commercial centers. Businesses in Dubai benefit from the lifting of lockdown restrictions with an influx of customers. The Emirate has progressively relaxed regulations in the city since it lifted strict lockdown measures in late April.
Since May, Dubai’s government has allowed shopping malls and commercial centers to open at 30% capacity. Patrons should be above age 12 and below 60 years of age, need to wear masks, and follow strict social distancing norms. Later that month, the Emirate announced the opening of various non-essential businesses like gyms, movie theaters, cafes, restaurants, educational and training institutes, child learning centers, and all retail and wholesale establishments at varying limited capacities.
IHS Markit also pointed out an increase in consumer demand as restrictions came down. Companies also saw additional sales as international flights began to operate again, and tourist venues reopened.
Real-estate markets also see a turn for a better since the announcement of the world-famous Expo 2021. Postponed because of the on-going pandemic, the event has a very positive outlook. Homebuyers and investors alike expect to reap good returns after the market rebounds and reach pre-COVID levels.
But the labor market and corporate sentiment painted a less optimistic picture as firms still look to cut back on costs. Employment fell for a fifth consecutive month in July.
Optimism that activity will rise in the next 12 months decreased for the first time since April. IHS Markit finds a vast difference among businesses over whether they expect to recover output by the summer of 2021.