Dubai government's rapid and effective healthcare measures and economic support initiative in response to the COVID-19 pandemic has enabled the Emirate in containing the virus spread and limiting its impact. Under the directives of Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, and close follow-up of Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Dubai Crown Prince and Chairman of Executive Council of Dubai, these comprehensive preventive and support measures paved the way for a quick recovery for the Emirate.

In the aftermath of pandemic repercussions, Dubai Government intensified its efforts to implement precautionary measures to protect the health and safety of the public as well as monitor changing conditions of the market and economy. With these measures, Dubai was able to rapidly return to normal life and resume its economic activities in record time.

In this regard, Sami Al Qamzi, Director-General of Dubai Economy, stated that Dubai's leadership implemented a wide range of measures that helped in ensuring that the impact of COVID-19 does not affect people and businesses in the long-term. Dubai emerged as one of the first cities in the world to gradually reopen its businesses and economic activities. Thanks to the directives issued by Sheikh Mohammed bin Rashid Al Maktoum, Dubai launched various initiatives aimed at overcoming COVID-19 challenges faced by individuals and businesses, resulting in a mitigating the impact of the pandemic.

Dubai Economic Outlook 2020-2021

The Dubai Government launched four stimulus packages during the period between March and October 2020, with the aim of minimising the economic impact of lockdown measures across the Emirate. Significantly, AED6.8 billion worth of initiatives helped in offsetting the repercussions in the form of job losses or disruptions to businesses.

As per a recent study performed by Dubai Economy, these stimulus packages resulted in limiting the expected economic contraction to -6.2 percent this year. As per an IMF (International Monetary Fund) report, this decline is in line with the growth outlook of countries around the globe.

 Dubai's hotel, restaurants and tourism sector are expected to witness a contraction of -20% in 2020 due to a severe impact of the precautionary measures adopted by the government to contain the virus spread. At the same time, the transport and storage sector is expected to witness a -11 percent contraction, while the retail and wholesale trade sector will contract by -9 percent.

Notably, the Dubai Government and its Future Foresight project have established strong foundations to ensure a rapid recovery for the emirate. Al-Qamzi explained that support measures, including investment in healthcare and food security, strengthened Emirate's resilience against pandemic repercussions. The continuous flow of local and foreign investments in both public and private sectors helped in boosting sustainable growth and a rapid transition to a knowledge-based economy, Al-Qamzi added.

A set of economic sectors and activities listed by Cabinet Resolution No, (16) for 2020 where 100 percent foreign ownership is allowed have supported the efforts to attract foreign direct investment into the UAE.

In October 2020, Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum launched the ‘Nasdaq Dubai Growth Market’ with the aim of assisting emerging companies and small and medium enterprises (SMEs) to attract investors and finance their projects through an initial public offering (IPO). Along with supporting local businesses, it also assists companies from various parts of the world in a bid to enable to them expand their markets globally.

A ‘Virtual Work Program’ launched in October 2020 provided global professionals with an opportunity to work remotely while using Dubai as their residential base such that they are able to benefit from the Emirate's safe and high-quality working environment.

The program also compliments golden visas for long-term residency permits launched by the government in 2019 to allow foreigners to live, study and work in the UAE without the help of an Emirati sponsor. At the same time, they can hold 100% ownership of their businesses in the UAE with golden visas, which can be issued for a period of five or 10 years.

In addition to the Expo 2020 that is going to take place next year, the government is carrying out a number of other initiatives aimed at driving investment inflows and increase job creation in the coming years. According to a recent study by Dubai Economy, the emirate's growth is estimated to accelerate to 4% by 2021 in view of the ongoing initiatives and the prevailing outlook for the global economy.

Economic impact of lockdown measures in the first half of 2020

As per preliminary reports issued by the Dubai Statistics Centre, the emirate's economy witnessed a 10.8% decline in the first six months of 2020.

Arif Al Muhairi, Executive Director of Dubai Statistics Centre, affirmed that the decline is within the expected range of economic contraction in view of the unprecedented global economic impact of the COVID-19 pandemic, particularly in the first half of the year. Widespread lockdowns were implemented in a bid to protect public health and safety, which resulted in a major impact on economic activities across the world.

According to the data by the Dubai Statistics Centre, cross-border transactions and other related trade activities were severely impacted by the overall decline in the first quarter of this year. It is important to note that sectors like trade, transport, tourism and hospitality were majorly affected by border closures and restrictions on international travel. These activities accounted for 85.4% of the total decline.

During this period, trade, transport and storage saw a major decline, noting that trade activity alone decreased by 15.1%. However, despite this decline, trade contributed a 24 percent share to the emirate's economy. In addition, transport and storage activity decreased by 28.3%, which pulled Dubai's economy down by 3.6 percentage points after international travel, flights and airports were closed down. But, transport and storage activities also made a significant contribution of 10.3% to the emirate’s economy.

In Q3 2020, DP World managed 18.3 million twenty-foot equivalent units (TEUs) across its worldwide portfolio of container terminals. There was a 3.1 percent increase in total handling volumes year-on-year, and a 1.9% increase on a like-for-like basis. As per reports. DP World handled 52.2 million TEUs, a decrease of 2.5% on a year-on-year basis, and a decrease of 2% on a like-for-like basis during the first nine months of 2020.

With strong performances in Europe, the Americas, Africa and the Middle East, there was a growth in total container volumes on a comparable basis. This recovery was driven by various factors including a 10% increase in productivity on a quarterly basis after countries across the world reopened their economic activities. The Jebel Ali Port in the UAE witnessed a growth of 3.4% as compared to the previous quarter in tandem as regional commercial activities saw recovery and stabilization.

According to the Dubai Statistics Centre, there was a decrease of 34.6% in hospitality and food services (hotels and restaurants) activities during H1 2020. While the decline pulled the Dubai economy down by 1.7 percentage points, the sector also supported the economic growth with a contribution of 3.7%. In line with the global trend, the decline was expected due to the suspension of foreign and domestic tourism. 

A number of health-related activities also observed a decline of 13.2% in the first half of 2020 due to the changing healthcare priorities and reduction in specialized services, noting that the focus of the sector shifted to crisis management and counter-pandemic measures.

There was a 3.7 percent decline in real estate activities. However, the sector also contributed 8% to real GDP and an added value of approximately AED15 billion in H1 2020 to the economy. It was due to the drop in residential rental prices and margins received from the sale of real estate units, the sector observed a decline in its overall growth.

Meanwhile, financial services and insurance activities observed growth during the pandemic, with an increase of 1.4%, helping the economy to grow positively by 0.1 percentage points. In the first half of 2020, the sector boosted its contribution to the emirate’s economy to 11.5%. Arif Al Muhairi affirmed that the banking sector is strong and well-equipped to handle any future challenges, according to the data by the Central Bank.

Banks supported various banks and individuals in the UAE during the crisis. Reportedly, bank credit to residents rose by 5.5% by the end of the first six months of 2020. Data showed a 52% growth in financing for transport, storage and communications activity, while investment in personal finance for business purposes rose by 19%. Financing for food industries also increased by 10%, for chemical industries by 15%, and for agricultural activity by 9%.

Dubai International Financial Centre (DIFC), the leading financial centre in the Middle East, Africa and South Asia, reached a milestone during H1 2020 with the highest rate of company registration as it continued to work with its partners to contain the impact of the COVID-19 pandemic. According to data released by DIFC, more than 300 new companies joined its lists during H1 2020 which is a 25% increase as compared to the same period last year. It raised the number of active companies in DIFC to 2,584 which is a major achievement during the COVID-19 pandemic.

Maintaining its position as a growth driver, around 87 Fintech companies specialized in financial technology joined the innovation and technology excellence system at the DIFC. As a result, DIFC's number of registered and licensed financial technology companies increased by 74% as compared to H1 2019.

The first half of 2020 also witnessed a threefold rise in the size of the financial technology accelerator ‘Fintech Hive’ in the financial centre. It was driven by the opening of new and large spaces at Gate Avenue aimed at supporting the startup environment in the region and emerging entrepreneurs.

There was a record number of applications for participants in DIFC's fourth edition of Fintech Hive. This year, the programme saw a 46 percent increase after it received more than 600 applications from emerging companies across various sectors, including Islamic financial technology, organizational technology, insurance technology and other financial technology sectors.

Productive activities such as agriculture, mining, and the industry witnessed a growth of 1% in the first half of 2020, noting that these sectors remained active and operational under close monitoring for adherence to precautionary measures.

There was a growth of 1.1% for the government sector in the first half of the year, which contributed 5.4% to the emirate's real GDP. It pushed the economy up by 0.1 percentage point amid continued spending on development projects. At the same time, total government spending rose by 6% in H1 2020.