Covid-19 Impact on UAE
The world is facing an unprecedented challenge with far-reaching social and economic effects of the coronavirus Covid-19 on the current generation.
S&P Global Ratings economists have forecasted a global recession for 2020, predicting GDP growth to be 1% to 1.5%, as the global slump in demand affects cash flow across almost every industry.
The IMF said that Covid-19 will knock 6.3% off its projected global economic growth in 2020 as a result of the lockdown measures taken to prevent the spread of coronavirus.
The Covid-19 outbreak is expected to create a number of challenges for the major projects across the Middle East and North Africa. Lower oil revenues and increased debt will result in a review of capital spending priorities.
The pandemic is expected to have a severe impact on growth in the UAE’s non-oil-dominated economy. Travel, trade and business activity in general is expected to be severely hit. The region’s construction sector is also significantly impacted by the pandemic. Construction and transport projects account for 77% of the projects planned or underway in the UAE.
Air transportation is an important source of revenue for the UAE. According to a 2019 report from the International Air Transport Association, air transportation accounted for $19.3 billion, or around 5% of the UAE’s GDP last year.
The country has taken several financial measures to minimize the economic crisis. The government had announced stimulus worth $35 billion that included aid to the banking system, facilities for loans and injecting funds into the bourses.
The Central Bank of the UAE has doubled stimulus package to $70 billion. Sheikh Hamdan bin Mohammed bin Rashid al-Maktoum, Crown Prince of Dubai and chairman of the Executive Council of Dubai, has announced $409 million in direct stimulus for the energy, trade, retail and tourism sectors. Additionally, Abu Dhabi introduces $1.36 billion stimulus package.
As much of the tendering activity for infrastructure projects across the Middle East has come to a halt due to the outbreak, some sectors are growing.
The pipeline of projects in the UAE is more than $700 billion. The country has been able to push ahead with water and renewable energy projects. Oil and gas spending in Abu Dhabi is also forecast to increase over the coming year.
Abu Dhabi National Oil Company says it will continue to invest responsibly and smartly through the downturn and will remain committed to its targets in production capacity growth in order to ensure a stable and reliable supply of energy products to its global customers.
While Covid-19 outbreak will impact UAE’s economic growth in 2020, the country's long-term projections are still relatively strong.