- Economists expect a growth forecast of 5% in 2021
As European governments toughen restrictions following another wave of Covid-19, Dubai’s economy flourishes at a surprising rate, with property sales touching decade highs and streets packed with traffic.
The Dubai Expo 2020, which was postponed last year due to the pandemic, has been in full swing, attracting many international travellers, especially from the countries where Covid lockdowns are creating chaos, i.e., Austria, the Netherlands and other European nations.
The key reason behind the rebounding economy is that the Dubai authorities have somehow managed to avoid another wave of coronavirus. About 90 per cent of the city’s population is fully vaccinated and high-risk individuals are being administered booster doses.
Businesses in Dubai have been fully open for months now, but the daily number of cases have not crossed the 100-mark in the last 50 days.
Gaia, one of the busiest dining spots in Dubai, has been booked two weeks in advance and the influx of visitors keeps staff on their toes.
“Every day feels like a Friday” Evgeny Kuzin, chairman and co-founder of Bulldozer Group, which owns and runs several restaurants including Gaia, told Bloomberg.
“We’ve been hiring staff to keep up with renewed demand.”
Faster than expected
Scott Livermore, the Chief Economist for Oxford Economics Middle East in Dubai told the publication that the recovery has been faster than they expected. Witnessing the multifold growth, Livermore also raised his growth forecast by about 1 percentage point to 5% for 2021.
“Expo has played a role in that but also the success Dubai has had in avoiding a Delta wave that has allowed the domestic economy to pretty much getting back to normal.”
The recovery did not seem possible until the end of the last year when most of the city was shut down, like many places around the world. Even when the Dubai government began to open markets and places, people were afraid of coming out due to strict social distancing rules. While some five-star restaurants opted for home deliveries to stay afloat, others closed.
Where these strict measures helped curb the spread of the novel coronavirus, they also impacted Dubai’s economy, which relies heavily on tourism. According to Bloomberg, the city's economy contracted more than 11 per cent last year. The impact was such that its flagship airline, Emirates, had to halt flights, lay off employees and cut salaries to control losses.
The economy began to pick up late in September, after declining throughout the year, thanks to two major events, Dubai Expo 2020, and the T20 World Cup 2021, according to Google mobility data.
October saw the biggest boom in the business activities since the pandemic as the hotel occupancy rates soared to 82%, a 60% hike from a year ago and about 6% higher than 2019’s like-for-like levels, Bloomberg reported quoting data from research firm STR Global.
“For the first time in a long time -- since 2015 at least -- there is a strong feel-good factor in the hospitality market in Dubai,” the publication quoted Philip Wooller, Middle East and Africa director at STR Global as saying.
The oil factor
Another factor behind this boom, as experts believe, is the rising price of oil in the international market.
“Real estate prices crashed more than a third from record highs in 2014, when crude prices collapsed, exacerbating a supply glut. This year, home prices have risen at their fastest pace since 2015, with transaction volumes up 77% in August from a year earlier, and 56% from 2019 levels. But apartment rents have fallen 5% as construction continues, highlighting the fragility of a market that still owes much of its allure to Dubai’s status as a tax-free haven for the wealthy to park money,” Bloomberg reported.
Despite that, there is a sense of fragility in the market; a danger that pandemic will catch up with the “free-wheeling city.”
“Many factors might have contributed to Dubai’s upturn: High oil prices have created a boom in the region, a receding virus and the Expo have boosted tourism and a recovery in the real estate market has improved sentiment. It’s all looking great now although some of these tailwinds could fade over time,” Ziad Daoud, the chief emerging-markets economist was quoted as saying.