UAE positions economy for recovery
Abu Dhabi’s recovery depends on oil prices, while Dubai needs a rebound in aviation and tourism
The UAE had 40,507 Covid-19 infections by 11 June, and although this number continues to increase, the spread of the virus has been gradual since lockdown measures were introduced in March.
The number of fatalities has been low when compared to other countries, with 284 deaths recorded so far, and the government is now moving to open up the economy again.
The total value of the central bank’s measures to mitigate the economic impact of Covid-19 has reached AED256bn
While people’s health remains the leadership’s priority, the restart is desperately needed and perhaps explains why Dubai in particular was so quick to lock down in March. The federation’s GDP is expected to fall by 3.5 per cent this year, followed by a recovery of 3.3 per cent in 2021, according to data released in April by the IMF.
The UAE’s central bank struck something of a more optimistic tone when it said it expects a recovery in economic activity in the second half of this year, adding that economic stimulus measures will weigh in positively on the purchasing managers’ index, real estate prices, employment and credit growth. The total value of the central bank’s measures to mitigate the economic impact of Covid-19 has reached AED256bn ($69.7bn).
Routes to recovery
The economic recovery of the two largest emirates will depend on different things. In Abu Dhabi, fortunes will depend on the price of oil in the future. If oil prices can return to the same levels they were last year, then the emirate should once again feel comfortable about pressing ahead with its planned projects. If they do not, those plans face the prospect of being delayed.
In Dubai, much will depend on the success of Expo 2020, which is rescheduled for 2021, and the recovery of the trade, tourism and transport sectors.
While the expo will remain a critical event, the bellwether company will be Emirates airline as it attempts to reconnect Dubai to the global market. Crown Prince Hamdan bin Mohammed bin Rashid al-Maktoum recently described Dubai airport as the emirate’s heart and Emirates as its arteries. Wholesale job cuts made at the airline suggest that the leadership thinks Dubai’s return to full health will take time.