Efforts to contain the coronavirus outbreak are hitting the UAE’s economy hard. The whole on economy PMI, which covers the non-oil private sector, dropped to a record low of 44.1 in April and the survey for Dubai fell even further.
The implications of COVID 19 and the damage to Dubai’s economy was highlighted by a recent survey which showed that a majority of businesses expect to close within the next year.
According to the Dubai Chamber of Commerce almost half the restaurants and hotels surveyed are expected to go out of business in the June alone along with with three-quarters of travel and tourism companies expecting to close in that time.
Dubai, has one of the most diversified and non-oil dependent economies in the Gulf, but relies on sectors like hospitality, tourism, entertainment, logistics, property and retail. Its hotels and restaurants are internationally acclaimed however most remain closed. Some 74% of travel and tourism companies said they expected to close in that time, and 30% of companies in transport, storage and communications expect the same fate.
The authorities are trying to find possible routes for the opening of the tourism sector in the summer but, for now, almost all flights in and out of the UAE remain cancelled with no end in sight. Whilst there has been a steady increase in activity in the retail and recreational sectors, it remains well below normal levels and those recorded last year.
Full and partial city-lockdown measures over the last few months have brought demand in key markets to a standstill. This double-shock impact is pushing economic activity down to levels not seen even during the financial crisis.
Oil production surged in March and April as the UAE followed Saudi Arabia in ramping up production after OPEC+ talks fell apart. But energy minister, Suhail al-Mazrouei, has confirmed output will be reduced in the coming months in line with the latest deal among global oil producers. Finally, consumer price figures for April showed that the pace of deflation accelerated from 1.6% y/y in March to 1.9% y/y last month as weaker non-food inflation more than offset a jump in food inflation.
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