The economy of Dubai, the Middle East’s business hub, will likely contract 6.2 percent this year, according to the emirate’s media office. It’s expected to see four percent growth in 2021.
Gross domestic product fell 10.8 percent in the first half of the year, estimates published on Wednesday showed. The economy is heavily dependent on tourism and retail, sectors especially hard hit by the pandemic.
The fallout this year is “within the expected range of economic contraction, given the massive global economic impact of the Covid-19 pandemic”, said Arif Al Muhairi, executive director of the Dubai Statistics Centre. “The critical priority placed on combating the pandemic and protecting public health and safety induced a widespread slowdown.”
In the United Arab Emirates, of which Dubai is a part, economic output is seen shrinking around six percent as well, with lower oil prices contributing heavily to the slump.
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 percent. Despite the decline, trade remained the largest contributor to the emirate’s economy, with a 24 percent 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 percent, 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 percent to the emirate’s economy.
The Dubai Statistics Centre data also shows a decrease of 34.6 percent 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 percent, the sector contributed 3.7 percent to it.
The decline, part of a global trend, was largely expected due to the complete cessation of foreign and domestic tourism and the strict safety procedures, including complete closures of establishments operating in these sectors.
Real estate activities also witnessed a decline of 3.7 percent. The sector contributed eight percent to real GDP and an added value of approximately AED15bn 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.
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