Coronavirus shutdowns to hit Dubai’s economic lifeline

DUBAI, United Arab Emirates – Dubai is closing its famous malls and halting all passenger flights, capping a series of shutdowns on once-thriving sectors that serve as its economic lifeline but which have been sacrificed to curb the coronavirus.

A few days after barring foreigners, including those with residency permits, from entering the country, the emirate said it would close its airports to commercial flights, shut shopping centers, and restrict restaurants to home deliveries. 

Within hours of the announcement, which will be enforced by Wednesday, March 25, the city’s vast malls were already largely deserted, with corridors and concourses empty and shops devoid of customers.

Boasting the most diversified economy in the Gulf, Dubai derives 94% of its public revenues from non-oil sources which also make up the majority of its gross domestic product (GDP).

The city-state presents itself as a global hub for tourism, trade, and finance, boasting one of the biggest real estate markets in the region.

The glitzy emirate, which last year welcomed 16.8 million visitors, has now completely shut tourism outlets, directly impacting hundreds of hotels and countless dining and entertainment facilities – the backbone of an economy already stressed by a downturn.

Dubai carrier Emirates Airline, the biggest in the Middle East, transported some 90 million passengers last year, while Dubai Airport retained its status as the biggest for international passengers, serving 89 million travelers.

In the wake of the airports announcement, Emirates said it would suspend all passenger flights by March 25, and Abu Dhabi-based carrier Etihad said it would also temporarily halt all its flights to and from its home base.

The UAE – which takes in 7 emirates including Dubai – has so far announced a stimulus package worth $35 billion which includes injections into the stock market and support for various sectors.

Bad timing

The UAE on Friday, March 20, announced its first two deaths from the COVID-19 disease, having reported more than 150 cases so far.

Capital Economics said that efforts to contain the coronavirus “look set to hit tourism sectors across the MENA (Middle East and North Africa) region hard.”

In several Mideastern countries, including Dubai, tourism accounts for about 12.5% of GDP, the London-based consultancy said in a report.

Dubai is vulnerable to the hit to the sector, it said, especially as the shutdown is taking place at Dubai’s peak time for arrivals, when the climate is cooler and welcoming, ahead of the scorching summer.

“According to Mastercard, tourist spending in the Emirate was the largest of any city in the world last year,” it said.

If the travel restrictions continue until the end of the 2nd quarter as currently assumed, “we estimate that the downturn in tourism sectors will directly knock at least 2% to 3% off GDP this year,” Capital Economics said.

This comes at a time when Dubai has been battling a downturn in which GDP grew by just 1.9% and 2.1% in the past two years, the weakest since the 2008 global financial crisis.

Expo threatened

Wholesale and retail trade represents a quarter of Dubai’s GDP, worth in excess of $25 billion. 

The health ministry and the disaster management authority said in a statement early Monday, March 23, that the move to shut malls would come into force within 48 hours and last “for a renewable period of two weeks.”

Dubai’s vast shopping centers include Mall of the Emirates, which has its own indoor ski slope, and Dubai Mall, which is one of the world’s largest and is next to Burj Khalifa, the world’s tallest structure.

The coronavirus closures also come at a time when Dubai prepares for the global trade fair, Expo 2020, scheduled to open in October. 

Organizers said on Sunday, March 22, that they will “reassess and adjust” preparations due to the novel coronavirus outbreak. 

Many of Dubai’s economic forecasts had been based around the event and any decision to cancel or postpone it will be a heavy blow. 

The emirate has spent tens of billion of dollars to develop its infrastructure and services to be ready to host the 6-month fair, with the hope of attracting around 25 million visitors.

Dubai’s bourse has also been hammered in the crisis, shedding a third of its value since the start of March. On Monday, it dipped 3.8%. – Rappler.com