Dubai ** September 2021: Under the leadership of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, and follow-up by His Highness Sheikh Hamdan bin Mohammed Al Maktoum, Crown Prince and Chairman of the Executive Council, the Government of Dubai adopted a set of decisive measures to limit the spread of the Covid-19 pandemic and to provide vaccinations widely and effectively to all residents. These efforts were accompanied by new legislation and amendments to the investment and residence laws in the country that reflect the forward-looking vision of the wise leadership. As a result, the economy regained its usual vitality and ability to attract local and foreign investment and to resume the journey of development, diversification and sustainable economic growth. According to Dubai’s Department of Economic Development (DED), the economy of Dubai is projected to grow by 3.1% this year, and growth is expected to accelerate in 2022 to reach 3.4% in light of hosting Expo 2020 in Dubai.
During the last period, DED has intensified its efforts in support of businesses, especially in regard to facilitating transaction procedures and commercial licenses. The Department continues to adopt best practices and high-quality standards in its quest to make Dubai the world’s lead smart city. DED’s active engagement and open communication lines with the business community and society at large have ensured the design and implementation of the best precautionary and practical measures, and safety rules that guarantee on the one hand public safety, and on the other, the proper functioning of work.
In this regard, H.E. Sami Al Qamzi, DED Director-General, said, “Dubai’s latest economic indicators show that the precautionary measures, comprehensive vaccination campaigns, stimulus packages, and legislative amendments that the UAE and the Emirate of Dubai have adopted were right on target. Dubai’s economy is now firmly on the recovery path and supported by increasing business and consumer confidence. This includes in particular business activities that were most negatively impacted by the pandemic such as tourism and transport. Under the direction of H.H. Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Governor of Dubai, and follow-up of H.H. Sheikh Hamdan bin Mohammed Al Maktoum, Crown Prince and Chairman of the Executive Council, Dubai has resumed its development journey guided by a comprehensive and ambitious strategic vision that seek to enhancing domestic demand and exports, opening new markets, and attracting investors and talent.”
Economic Outlook, 2021-2024
In the year 2020, Dubai’s output was below the existing production capacity, just like elsewhere in the world. Confinement measures weighed on both supply and demand that together led to a significant decline in economic activity, including in Dubai despite the significant support provided by the government to firms in all sectors.
Al-Qamzi recalled the five consecutive stimulus packages that the Government of Dubai has launched during the period March 2020 to September 2021. The packaged contained a number of support measures, such as the suspension of market fees, reduction of customs fees, water and electricity bills, providing payment facilities of commercial registration fees, postponing rent payment, canceling fines, and reducing municipal and tourism fees on hotels. The total financial cost of the five packages amounted to AED 7.1 billion (more that 1.6% of Dubai's GDP). These five packages came on top of economic support measures launched by the UAE Federal Government, including the “Targeted Economic Support Scheme” that the Central Bank of the UAE launched in March 2020 to ease the financial burden on firms and help many of them to avoid bankruptcy.
Despite the positive developments in vaccination rollout in the world, especially in developed countries, uncertainty continues to weigh on the prospects for a quick economic recovery in many countries, especially in view of the new outbreak of the Covid-19 Delta variant and its impact on travel, following the restrictive measures applied in the source and destination countries.
As was the case in other countries, Dubai was affected by these developments, resulting in a significant decline in economic activities, especially in sectors such as transport and tourism, despite the large increase in domestic tourism.
H.E. Sami Al Qamzi noted that despite these developments, Dubai witnessed between September 2020 and July 2021 a relatively faster recovery in these activities compared to other countries. It is expected that Expo 2020 will provide a strong economy-wide boost especially in the transport and tourism sectors.
Taking account of recent developments and future prospects and risks during the remaining months of 2021 and the upcoming years, DED expects Dubai GDP to grow by 3.1% in 2021, given the significant recovery beginning in Q2, particularly in the activities that witnessed an almost complete shutdown in April and May 2020. These forecasts also take account the expected impact of Expo 2020 on economic activities. As shown in Figure (1), it is expected that the accommodation and food services sector will grow by 8.5% in 2021, compared to 2020, and transport, storage and communications by 4.1%, reflecting the gradual recovery expected until the end of 2021 in tourism and transport activities. The wholesale and retail trade is also expected to regain a large part of its activity following the COVID-19-induced slowdown, achieving a growth of 4.7% in 2021, while the construction activity is likely to decline in 2021 by 2% as a result of stabilization in the construction of residential, office, and hotel space, and a relative decline in construction related to infrastructure following their rapid growth recorded in the years before 2020.
Al Qamzi pointed out that growth is expected to accelerate in 2022-2024, driven by the continuous recovery of activities that were most affected by Covid-19, such as tourism and international transport, which will also benefit from Expo 2020 activities in the first months of 2022. The outlook for those years, as indicated in Figure 2, shows that the overall growth rate will rise to 3.4% in 2022 and then to 4.2% in 2023 before returning to 3.9% in 2024 when the sectors most affected by the global crisis return to their pre-COVID-19 levels of activity.
Economy of Dubai grows by 1% in Q1 2021, compared to Q4 2020. Thus, the recovery phase has started, and is expected to accelerate during the next phase.
The economic performance report issued by Dubai Statistics Center indicate that Dubai economy achieved a growth of 1% during Q1 2021, compared to Q4 2020, based on preliminary estimates of the seasonally-adjusted GDP data.
This growth is driven by the outstanding performance in the manufacturing sector, the improvement in tourism, transport and storage activities, in addition to the significant growth in the financial sector performance for the same period.
H.E. Aref Al Muhairi, Executive Director of Dubai Statistics Center, said: "These figures indicate that there is a positive development and rapid recovery of Dubai economy and the United Arab Emirates, compared to 2020, which witnessed major economic declines worldwide, driven by the decline in the sectors of tourism, transport and other economic activities. This is a natural consequence of COVID-19 on the global economy."
Al Muhairi explained that Dubai’s economy contracted by -3.7% in Q1 2021 compared to Q1 2020. Nonetheless, this contraction points to a positive development in view of the performance back during 2020 when the contraction reached -10.9% compared to 2019.
Al Muhairi indicated that despite the decline in certain activities in Q1 2021, others, especially those of high strategic significance, witnessed strong growth. This is most evident in the trade sector –a sector that contributes close to 24% to Dubai’s GDP, where growth reached 2.8% in Q1 2021, compared to the same period of 2020. Indeed, the trade sector was one of the leading sectors whose contribution to economic activity has lessened the economic impact of COVID19.
Dubai foreign trade data issued by Dubai Customs indicate that non-oil foreign trade grew in Q1 2021 by 10%, reaching 354.4 billion dirhams, compared to 323 billion dirhams in Q1 2020. Exports achieved a significant growth of 25%, reaching 50.5 billion dirhams, and the value of imports increased by 9%, to reach 204.8 billion dirhams, while the value of re-exports increased by 5.5%, to reach 99 billion dirhams.
The financial and insurance activities also achieved a growth rate of 3.5% in Q1 2021, compared to Q1 2020, and their contribution to the Emirate’s GDP rose to reach 12.8%. It is also one of the sectors that contributed to reducing the impact of Covid19 on economic performance. This performance resulted from the growth of total deposits and loans during Q1 2021, as loans grew by 2.6% and deposit balances grew by 3.3%, while interest rates on loans decreased by 24% and on deposits by 35%.
Moreover, activities in the manufacturing industry also witnessed a growth of 3.2%, and their contribution to the overall economic performance increased to 9.5%. Consequently, it was one of the activities that contributed to reducing the impact of the global economic decline on the Emirate’s economy. The activities of the food industry, pharmaceutical products, rubber and plastic products, and base metals manufacturing contributed to the growth of the manufacturing sector positively.
Real estate activities also achieved a growth rate of 2.4% during Q1 2021, compared to Q1 2020, contributing to 8.7% of the real GDP. Consequently, it was one of the supporting activities to overcome the effects of the global economic decline and its consequences on the Emirate's economy. The real estate sector in Dubai achieved a significant growth in sales transactions in Q1 2021, compared to Q1 2020 and 2019 before the outbreak of the epidemic. This shows the high resilience of the real estate sector in Dubai and its ability to respond to economic developments and demand volumes.
Dubai Statistics Center report indicate that during Q1 2021, the COVID19 pandemic affected most severally the accommodation and food services, transport and storage sectors. Both activities decreased by 25.6%, compared to Q1 2020. This decline is considered normal under the global economic circumstances, as most countries of the world closed their airports, land and sea crossings to passenger traffic and adopted precautionary measures, causing the reduction of movement of international visitors, and then significant negative consequences affected tourism movement globally. While it is expected that Dubai’s economy will be affected by global conditions given its critical role in regional and global trade and passenger travel, it is important to note that the Emirate’s flexibility, advanced capabilities and the strategic administrative system enabled a rapid and effective response to the crisis and thereby minimized the economic costs of the pandemic in absolute terms and compared to many regional and global economies.