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Wed 1 Jul 2020 09:35 AM

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Dubai's economy declined by 3.5% in Q1 amid Covid-19 crisis

Real estate, finance, manufacturing and government sector all recorded growth despite global pandemic

Dubai's economy declined by 3.5% in Q1 amid Covid-19 crisis

Real estate activity registered a growth of 3.7 percent in Q1 2020 compared to the same period last year, contributing eight percent to the overall economy and pushing it higher by 0.27 percentage points.

Dubai’s economy declined by 3.5 percent in the first quarter of 2020 as the emirate grappled with the impact of the coronavirus pandemic.

This compares to a growth rate of 2.2 percent in 2019, according to Dubai Statistics Centre (DSC).

However, real estate, finance, manufacturing and the government sector retained their growth momentum despite the strict lockdown measures adopted across the city.

Arif Al Muhairi, executive director of DSC, said: "The worldwide restrictions on movement for individuals through air, sea, and land entry points, as well as the unprecedented intensification of precautionary measures, which limited the flow of freight across borders, had significant repercussions on international trade and the global economy.

“Being a central player in international trade and a vital global passenger transit hub, Dubai’s economy was affected by these exceptional circumstances.”

Unlike other sectors, real estate activity registered a growth of 3.7 percent in Q1 2020 compared to the same period last year, contributing eight percent to the overall economy and pushing it higher by 0.27 percentage points.

While the finance and insurance sector recorded a positive trend, registering a slight growth of 0.3 percent, despite the challenging global economic conditions.

Public sector role

Al Muhairi also revealed that the public sector registered a growth of 0.6 percent in the first quarter, accounting for 5.1 percent of Dubai’s real GDP.

“The role played by the public sector was significant in mitigating the impact of the global economic crisis experienced in Q1 2020,” he said.

Al Muhairi said that trade, transport and storage activities contracted by 7.5 percent in Q1 2020 compared to the first three months of 2019, although it retained its status as the largest contributor to the emirate's economy, accounting for 23 percent of total GDP.

With the absence of foreign and domestic tourism, exacerbated by movement restrictions, the accommodation and food services sector (hotels and restaurants) was among the other major set of economic activities affected by the Covid-19 pandemic in the first quarter of this year, declining by 14.8 percent from the same period in 2019. The sector contributed 5.1 percent to the overall economy of the emirate.

Dubai’s health sector declined by 3.7 percent in Q1 2020 due to the need to allocate the majority of health resources to combating the Covid-19 pandemic, whereas the education sector recorded a growth of 1.1 percent during the same period as a result of the continued online learning.

According to data revealed by the UAE Central Bank, total internal deposits of all banks in the country increased by 6.9 percent in Q1 2020. Non-resident deposits rose by 3.7 percent. Corporate deposits accounted for 37 percent of total deposits, while individual deposits accounted for 26 percent.

The CBUAE quarterly review revealed that the volume of banking sector credit extended to residents grew by 4 percent in Q1 2020 compared to the corresponding period in 2019 - relief measures rolled out by banks for individuals and companies in line with government directives contributed to easing the financial impact of the global Covid-19 crisis on families and organisations.

The International Monetary Fund (IMF) projects a 4.9 percent decline in the global economy in 2020, in contrast to a growth of 2.9 percent in 2019. Advanced and developing economies are expected to decline by eight percent and three percent in 2020 respectively, while Middle East and Central Asia are expected to contract by 4.7 percent in 2020 compared to one percent in 2019.

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