The UAE is poised for a rapid rebound from the Covid-19 pandemic, mainly led by tourism, opines Danube Group’s Rizwan Sajan
As he admits, the chairman and founder of Dubai-based construction and property conglomerate Danube Group is an optimist by nature, and hence it is easy to fathom why he believes that the UAE’s economy will recover rapidly from the Covid-19 crisis.
“The UAE is set to witness one of the fastest V-shaped recoveries in the world from the Covid-19 pandemic due to a number of factors including the way the authorities handled the crisis from day one,” he insists, in a bold prediction.
The Dubai-based businessman is confident that before the end of the second quarter of 2021, the situation will bounce back to normal, with the local economy back on track for strong growth. While one could attribute his sanguine economic outlook to his personality, Sajan stresses that he has solid reasons to back his projection.
“If you look back, the UAE recovered faster compared to other economies from all the previous crises they faced in the last three decades, be it the Gulf war or the global financial crisis. And there are practical reasons for this. The first and foremost is the strong and visionary leadership of the country.
Also, from the beginning, the UAE has invested in its future, be it hard or soft infrastructure, technology, systems, processes, people and the global connectivity that helps it to recover fast.
It is a future-ready country,” he explains.
But the world remains very much in the throes of the Covid-19 crisis, even as governments and businesses across the globe scramble to adapt and adjust to the changes the pandemic has brought, seemingly overnight.
In June, the International Monetary Fund projected that the crisis will push the global economy into the “worst recession since the great depression, surpassing that seen during the global financial crisis a decade ago”.
Regionally as well, the GCC states – including the UAE – have seen an exodus of expatriate workers, which in turn is anticipated to adversely affect the other sectors of the economy.
Sajan admits that the magnitude of the Covid-19 pandemic surpasses the previous crises due to the growing global death toll, the rise in infections, as well as job and business losses. However, he emphasises that people must remember that while the situation is grim, Covid-19 is a public health crisis that will pass.
In a detailed interview, he explains why he is so positive about the country’s recovery.
You appear extremely optimistic about the UAE economy’s post-Covid-19 V-shaped recovery. Could you explain why and how?
There are a number of reasons why I am so optimistic. There are internal and external factors that are going to work for the recovery of the UAE and Dubai.
Firstly, one should not forget that it is a short-term public health crisis, which will soon become part of history. The way the UAE is winning its war against the virus, we expect the country to become Covid-19-free very soon. If that happens, all the exhibitions, conferences and business events will restart and the businesses will start to bounce back into profitability.
The Indian Premier League (IPL) is a very good case in point and will attract many visitors to the UAE – not only from India, but from a number of countries. The IPL is poised to give the UAE economy a massive boost with higher occupancy in hotels and increased consumption at restaurants.
Also, with the pandemic continuing to spread across the world, tourists are looking for ‘safe-haven’ destinations. Right now, everyone wants to come to Dubai and hence business will be much higher in October, November and December.
Along with tourists, people in countries where the pandemic is still growing are also looking for safe places to relocate to. The UAE is well-positioned to benefit from this trend. The country could attract a large number of wealthy people – businessmen, professionals and retirees – which will accelerate the pace of recovery and economic growth. We anticipate a major influx of minorities from India, especially those who can afford to finance their stay in the UAE. They might shift to the UAE with their investments.
If this happens in a big way, all the vacant homes won’t be enough to host them. This will trigger a massive demand for new homes.
In general, this is how I see the recovery. However, each economic sector will react in its own way.
Let’s talk about aviation and tourism – the two most important sectors that contribute to the growth of Dubai’s economy, which have been hit hard by the crisis. How do you see them recovering?
Aviation and tourism are the biggest contributors to Dubai’s economy. These were also the very first sectors to be severely affected by the coronavirus pandemic, due to the ban on international flights effective from March 25, 2020. The move halted international passenger movement and as a result, hotels had to close doors and send their staff on unpaid leaves.
Most tourism attractions in Dubai have gradually reopened since June and the emirate is currently seeing a surge in visitors to its shopping malls, family entertainment centres and theme parks, with the region’s biggest summer extravaganza – Dubai Summer Surprises – driving domestic tourism.
With Dubai also reopening to tourists from July, visitors have started streaming in to enjoy the city’s sunshine, clean beaches, shopping malls, luxury hotels and amusement parks.
Before the end of the year, the business events season will begin. A number of exhibitions and conferences will start attracting businessmen and professionals to Dubai.
Moving to the retail sector, another major industry that has been hit by the crisis, how do you see the recovery?
The retail sector, which is largely reliant on international and regional tourism, is set to recover fast once tourists start coming to Dubai. However, since most UAE residents are not travelling abroad, they are spending within the country. Dubai’s shopping malls are abuzz with activities, with families spending more time in malls than ever before.
An earlier UAE government survey had found that the country’s outbound tourism spend is expected to grow to 3.5 million trips involving $24bn by 2025. Due to Covid-19, most families are avoiding travel. A family of four usually spends around Dhs15,000 to Dhs20,000 on average during a summer holiday. Every year, around 300,000 to 500,000 families travel during the summer and winter holidays.
Using a conservative estimate, this translates to an annual spend ranging from Dhs4.5bn to Dhs10bn on air tickets, hotel booking, site-seeing, food and beverage, transport and entertainment.
Part of that money is now being spent in the domestic market on food and beverage, home furnishings, upgrading electronic gadgets and household appliances. So, shops and restaurants across the country will start making money in the fourth quarter once tourism picks up, giving a major boost to the retail sector.
What is your outlook for the shipping and logistics sectors?
With the reopening of the economies, the movement of goods has also picked up pace, reflected in the shipping and freight rates. The November freight rate at Jebel Ali port is poised to jump 400 per cent (four-fold) to $1,000 from $250 in October this year.
This reflects how quickly things are picking up. Dubai’s non-oil foreign trade values rose nearly 6 per cent to reach Dhs1.02 trillion during the first nine months of 2019, while volumes also grew by 22 per cent to reach 83 million tonnes during the period. With a V-shaped recovery, we project the shipping movements will resume to these levels by the end of this year due to growing consumption across the Middle East, Asia and Africa.
With people going back to work and companies’ cash-flows coming back to normalcy, things will surely bounce back due to the rise in consumption.
Sources: Gulf Business, Pixabay.
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