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- S&P Global Ratings says Dubai economy may take until 2023 to recover to 2019 levels due to the impact of the global coronavirus crisis
- STR Global reports Dubai’s hotel occupancy rate at 26 percent in June as inbound tourism sharply declined following global lockdowns and reduced air travel
American credit rating agency, S&P Global Ratings on Saturday, 4 October 2020, has stated that Dubai’s economy could contract by 11 percent in 2020 due to the restrictions on travel and tourism during the ongoing coronavirus pandemic.
The credit rating agency attests that based on publicly available information, Dubai’s gross general government debt will reach around 77 percent of the GDP this year i.e. AED90 billion compared to 61 percent in 2019. The agency further added that Dubai’s economy is more diversified than that of most its regional peers, it may take until 2023 for it to recover to 2019 levels due to the impact of the global Covid-19 crisis which forced the postponement of Expo Dubai 2020 to next year, the statement from S&P Global Ratings said,
“Dubai’s large exposures to tourism and aviation place it in a relatively more vulnerable position to the effects of Covid-19… The indirect effect of weaker demand from Dubai’s neighbours will dampen Dubai’s trade, tourism, and real estate markets,”
STR Global, a data intelligence and benchmarking firm, reported Dubai’s hotel occupancy rate at 26 percent in June as inbound tourism sharply declined following global lockdowns and much-reduced air travel to prevent spread of coronavirus pandemic. Another fact backing the sharp decline in hospitality sector is, fewer residents left Dubai during the hot summer months and instead spent more domestically to some extent has supported the economy.
On similar lines, S&P said,
“Local support for the economy cannot, however, offset the almost complete shutdown of inbound international tourism for most of 2020, and the likely slow recovery of the long-haul aviation that Dubai specialises in.”
The rating agency also exclaimed that the Dubai government now expects to post a deficit of AED12 billion (3.2 percent of GDP) this year, largely owing to the reduction in economic activity and the consequent expected 28 percent decline in revenue. The research note from S&P says, the new government bond issuance and loans will total around 7 percent of GDP in 2020. The government has issued AED8.4 billion of public debt so far in 2020, marking the biggest year for Dubai’s debt issuance since 2009.
A prospectus that accompanied Dubai’s planned offering of bonds and Islamic securities last month offered a glimpse into how government finances adjusted to the disruptions caused by the coronavirus.
The government revised this year’s budget revenue to AED44.2bn ($12bn), according to the prospectus, down more than 30 percent from what it originally envisaged. It also decreased its projected expenditure to AED56.2bn ($15.3bn) for 2020, leaving a deficit of AED11.9bn ($3.2bn).
On September 3, Reuters reported that Dubai is seeking to attract wealthy foreign retirees as the economy of the Middle East trade and tourism hub reels from the coronavirus pandemic and low oil prices, prompting many expatriates to leave. The emirate is granting visas renewable every five years to resident expatriates and foreigners over the age of 55 who fulfill specific financial conditions, the government media office said.