Dubai’s Economic Potential: A Closer Look at the Dubai Impressive GDP Growth
According to the Dubai Statistics Centre, Dubai’s economy contracted by 10.9% year after year in 2020, indicating a city hard hit by the coronavirus pandemic and the restriction of international travel.
Dubai is the commercial heart of the United Arab Emirates, with 3.4 million citizens and a large reliance on sectors including hospitality, tourism, retail, and travel, all of which had significant global reductions in the first year of the pandemic.
Unsurprisingly, the arts, entertainment, and recreation sectors (-55%), transportation and storage (-35%), and housing and food service activities (-33%) were the most badly affected in Dubai last year.
The first quarter of this year showed an increase of more than 11% over the previous quarter, declaring a steady increase in an accelerated growth that contrasts with a 3.7% year-over-year decline.
The headline increase was hampered by the fact that travel and tourism remained below pre-pandemic levels, although the two largest economic sectors—wholesale and retail commerce and financial services—saw yearly growth rates of 2.8% and 3.5%, respectively. Hotels, restaurants, and transportation and storage all saw drops from first quarter 2020 levels.
Dubai was a world leader when it came to returning to tourists in July 2020 after a very strict lockdown during which people were restricted to their homes and could only go with police permission. The only anti-Covid strategies still in use by the end of the summer were masks and social seclusion. Nightlife and recreational activities had also returned.
By the winter, the emirate had become a popular destination for travellers seeking normalcy, but by February, an increase in Covid infections had caused several nations, including the U.K., to place the UAE on its no-travel lists.
The recovery has been under pressure due in large part to the tardy return of travel and the slow easing of travel restrictions in several nations.
“We expect a rebound in annual GDP growth from Q2 2021 off last year’s low annual base, but global travel restrictions likely weighed on Dubai’s recovery in both Q2 and to a lesser extent in Q3,” analysts at Dubai-based bank Emirates NBD wrote in a report on Monday. However, “these travel restrictions have eased in recent weeks, and we expect growth to accelerate in Q4,” the bank stated.
According to Emirates NBD, the emirate would increase by 4% this year. For the entire United Arab Emirates, it predicts “whole UAE GDP growth of 1.9% this year from -6.1% previously.”
The UAE is well-positioned to experience increasing tourism numbers during the winter months of the fourth quarter, when warm weather and lenient Covid rules are anticipated to entice visitors from colder coastlines. The UAE has increased worldwide travel and one of the fastest vaccination campaigns in the world. Dubai expects Expo 2020, a six-month mega-event that has been postponed by a year owing to the pandemic, to be a significant tourist attraction.
While this is happening, the real estate industry, which was already in decline when the pandemic started, is experiencing a robust but uneven comeback that is being criticised by many market observers for being overbuilt. After Dubai’s majority-expat population fell by 8.4% in 2020 owing to the pandemic, the greatest population decline in the Gulf region, the supply of real estate as compared to demand has become more obvious.
Since the peak in 2014, residential real estate prices in Dubai “have been rebounding strongly from a record low at end-2020 — on the back of pent-up demand from both international and local buyers, improved investor and consumer sentiment, a rebound in oil and gas prices, and gradual macroeconomic recovery, which in Dubai has been supported by high Covid-19 vaccination rates and new visa and corporate ownership rules,” analysts at S&P Global Ratings said in a report Monda.
In fact, the emirate has implemented business and visa reforms aimed at making it simpler for foreigners to live, work, and own 100% of their firms in Dubai, as opposed to the traditional necessity of a local partner.
The World Expo 2020, which began this October a year late due to the epidemic, “will probably benefit Dubai’s real estate sector,” the S&P analysts predicted. But long-term price gains will be hampered by a structural oversupply of residential homes, making the recovery brittle.