DUBAI: While Dubai’s economy is expected to contract by 6.2 percent in 2020, with the travel and hospitality sectors hit hard by the coronavirus pandemic, the emirate saw a surge in bank financing for the transport, storage and communications sectors, and strong growth in the establishment of new financial technology (fintech) companies licensed to operate.
“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,” Sami Al-Qamzi, director general of Dubai Economy, said in a statement.
According to a report by Dubai Economy, economic growth in the emirate during the first half of 2020 declined by 10.8 percent, and is forecast to contract by 6.2 percent for the full year.
Due to the COVID-19 lockdown, global travel restrictions had a big impact on the hotels and restaurants sector, which contracted by 20 percent, followed by the transport and storage sector (down 11 percent) and the retail and wholesale trade sector (down 9 percent).
Throughout the pandemic, Dubai’s government launched four stimulus packages designed to support the local business community and reduce the economic impact of COVID-19. These support packages were valued at around 6.8 billion UAE dirhams ($1.85 billion).
“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 percent in 2020, a decline that is in line with the growth outlook of countries around the globe as reported by the International Monetary Fund,” Dubai Economy said in a report issued by WAM, the UAE state news agency.
Al-Qamzi said: “These efforts include investment in healthcare and food security that will not only reduce the likelihood of future shocks, but also contribute to enhancing the Emirate’s resilience against such shocks.”
According to the Dubai Statistics Centre, activity in the hospitality and food services sector decreased by 34.6 percent in the first half of the year compared to the same period in 2019. Real estate, a key pillar of Dubai’s economy, saw activity down 3.7 percent.
The financial sector reported more positive figures, with activity up 1.4 percent. The Dubai International Financial Centre (DIFC) added 310 new companies during the first half of 2020, up 25 percent compared to the same period last year, bringing the number of active companies in the free zone to 2,584.
Businesses in the emirate also enjoyed support from the banking sector, with the amount of credit distributed to residents up 5.5 percent by the end of the first six months of 2020 compared to the same period last year.
The data also showed 52 percent growth in financing for transport, storage and communications activity, and a 19 percent increase in personal finance for business purposes.
Staying with the sector, there was a surge in fintech companies, with 87 new ones joining the DIFC in the first half of 2020, a year-on-year increase of 74 percent.
Other sectors to see growth included productive activities such as agriculture, mining and industry, which grew 1 percent in the first half.
The government sector recorded growth of 1.1 percent in the same period, contributing 5.4 percent to the emirate’s real gross domestic product. Total government spending in the first half grew 6 percent year-on-year.