The UAE and the rest of the world faced a tumultuous year in 2020 as everyone struggled in the face of the coronavirus, and both the health and economic adversities it brought. Dubai saw an economic decline in 2020, with both oil and non-oil sector GDP declining in real terms, however, the rate of decline reduced towards the end of the year. The UAE, like other GCC countries, faced both sharply lower than expected oil revenue in 2020 in addition to the impact of the coronavirus on the non-oil sectors.
Due to the global lockdown demand for oil dropped dramatically, meaning cuts in oil production were necessary. With that being said, the price of oil did increase and stabilise throughout the second half of 2020, with price starting to rise again by the end of the year. Oil prices saw a sharp increase in 2021, providing a positive outlook for the economy. ADNOC will spend $122 billion over the next five years to help boost its capacity to 5 million barrels a day by 2030 from around 4 million now. Last year, the UAE was at odds with OPEC, arguing against the steep cuts to oil production. Despite this, Abu Dhabi is taking the initiative and working through the downturn to expand its ability to pump crude oil, with the Emirate announcing earlier on in the year that they have awarded Japan’s Cosmo Energy Holdings Co. the right to explore for offshore oil and natural gas as the UAE seeks to expand its output capacity. Yet despite these promising outlooks, it has been said that it is unlikely that oil activities will be able to return to pre-pandemic levels for 2 years at least.
The pandemic significantly impacted the real estate market in Dubai, which was disrupted with the lockdowns, restrictions, and the growing trend of working from home. Recovery in the commercial market was slightly slower compared to residential real estate, but it has also enjoyed a boom towards the end of the year. The fact that the total value of commercial units has decreased will likely mean that investors looking to take advantage of the economic situation will make 2021 a good year in terms of the number of transactions. This can be seen from the fact that despite buyer leads seeing a year on year increase of 79% throughout 2020, this was not reflected in the number of transactions. This might indicate a growing interest in purchasing a commercial property, with buyers waiting for 2021 to see what happens in terms of the economic situation.
Whilst it is undoubtedly true that the UAE and the rest of the world will need time to recover from the unprecedented events of 2020, from the onset of the pandemic, the UAE Government took great strides in monitoring market conditions and went to great lengths to ensure a quick resumption of economic activity. The UAE introduced a strict lockdown in March of last year in the interest of public safety. Whilst the decisive measures by the government last year meant business activity was strictly limited, during the period between March and October this year, the Government of Dubai launched four stimulus packages worth Dh6.8 billion to mitigate the impact of these measures and to reduce any repercussions in the form of job losses or disruptions to businesses.
In late 2020, we saw the government introduce a number of new laws that promoted the country as a pro-business environment with Dubai ranking third in the latest Global Cities of the Future list compiled by FDI Intelligence, which measured foreign direct investment flows across the world. From announcing that foreign nationals can now have 100% business ownership to the introduction of work from home visas that allow expats working abroad to live and work in Dubai, it is clear that the government is going to great lengths in cultivating an attractive location for businesses. Another initiative that the government launched was the Virtual Company Licence, which allows global businesses to access a regulated e-commerce platform populated by Dubai-based companies, while also exploring new markets and investment opportunities digitally. The introduction of trade relations with Qatar and Israel will also open the doors to new markets and will continue to encourage business and trade.
Whilst it is too early to tell about the success of these initiatives, 2021 had a promising start in terms of business, with a 9% year on year increase in the number of business licences issued by DED. January also saw Dubai’s private sector returning for the first time in 12 months particularly at the entry level, as companies expressed optimism toward future business. With UAE’s fast rollout of the Coronavirus vaccine, the launch of Dubai Expo expected later in the year, as well as the country’s economy looking to grow 1.3%, according to the IMF this renewed business activity looks to be just the start of a successful year for the UAE.