Economic growth in Dubai in H1 2020 declined by 10.8% and is expected to end the year with a 6.2% contraction
Dubai is expected to grow by four per cent next year following a quick economic recovery due to effective policy measures introduced by the government to contain the Covid-19 pandemic, says a report.
Economic growth in Dubai declined by 10.8 per cent during the first half of 2020 and is expected to end the year with a 6.2 per cent contraction due to the government’s swift response to the pandemic and its strong economic fundamentals that have paved the way for rapid recovery, according to a handout issued by Dubai Media Office on Wednesday.
During the period between March and October this year, the Government of Dubai launched four stimulus packages worth Dh6.8 billion to mitigate the impact of confinement measures in the Emirate that ultimately helped offset the shock and repercussions in the form of job losses or disruptions to businesses.
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.
“Dubai is a bright example of an economy that has succeeded in protecting lives and securing livelihoods by limiting the impact of the Covid-19 pandemic,” Sami Al Qamzi, director-general of Dubai Economy, said.
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.
"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," Qamzi said.
“This has paved the way for Dubai to be one of the very first cities to gradually reopen its markets and businesses. Under the directives of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, Dubai was a pioneer in launching initiatives to overcome challenges faced by individuals and businesses, which had a significant positive impact on minimising the economic impact of the pandemic,” he said.
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 (-nine per cent).
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.
Trade, transport and storage in general saw a decline in first half of 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 Programme 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.
DP World handled 18.3 million twenty-foot equivalent units (TEUs) across its global portfolio of container terminals in third quarter of 2020. Total handling volumes increased by 3.1 per cent year-on-year, and 1.9 per cent on a like-for-like basis.
During the first nine months of 2020, DP Worldhandled 52.2 million TEUs, a decrease of 2.5 per cent, on the basis of announced reports, and a decrease of two per cent on a like-for-like basis. The growth in total container volumes on a comparable basis was mainly driven by strong performances in Europe, the Middle East, Africa and the Americas. The recovery in total volume is due to several factors including a 10 per cent increase in productivity on a quarterly basis as global economies began to ease lockdown restrictions.
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 first half of 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. 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.
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 eight per cent to real GDP and an added value of approximately Dh15 billion in first half of 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 and insurance activities flourish
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.
Arif Al Muhairi remarked that the banking sector in the country is in a strong position to face any future challenges as data from the Central Bank show that the UAE banking system remained active in financing and extending credit in first half of 2020.
Businesses as well as individuals were supported by banks in the UAE during the crisis period. Bank credit to residents in general rose by 5.5 per cent by the end of the first six months of 2020 compared to the same period in 2019, and data indicated a 52 per cent growth in financing for transport, storage and communications activity, and 19 per cent in personal finance for business purposes.
Financing for food industries grew by 10 per cent, for chemical industries by 15 per cent, and for agricultural activity by nine per cent, confirming the importance of the banking sector in supporting vital economic activities in the UAE.
Dubai International Financial Centre (DIFC), the leading financial centre in the Middle East, Africa and South Asia, continued to lead the future of the financial sector in the region during first half of 2020, reaching the highest rate of company registration in light of its continuing work with its partners to overcome the impact of Covid-19. DIFC revealed that 310 new companies joined its lists during first half of 2020, an increase of 25 per cent compared to the same period last year, bringing the number of active companies in DIFC to 2,584, representing a major achievement, especially during Covid-19. This achievement comes as the financial sector and the related innovative sectors continue to place their trust in Dubai as the leading financial hub and preferred financial technology centre in the Middle East, Africa and South Asia.
Fintech companies maintained their position as a major growth driver, with 87 companies specialised in financial technology joining DIFC’s innovation and technology excellence system, increasing the number of registered and licensed financial technology companies by 74 per cent compared to first half of 2019. The first half of 2020 also witnessed a threefold increase in the size of the financial technology accelerator ‘Fintech Hive’ in the financial centre with the opening of new and large spaces at Gate Avenue to support start-ups and entrepreneurs.
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.
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