Dubai Faces Major Economic Trouble due to COVID-19 Lockdowns
Dubai’s economy thrives as the emirate offers free movement of people, traded goods and money worldwide and coronavirus pandemic has put brakes on many of these factors. Dubai was earlier facing trouble as well but the government has managed to help the emirate come out of the economic troubles. Dubai has shown resilience in the past as well and economic experts tracking Dubai feel that it will come out this time as well, but the recovery could be slow and painful.
With events canceled, flights grounded and investment halted, this sheikhdom in the United Arab Emirates is threatened both by the virus and a growing economic crisis. Under pressure even before the outbreak, Dubai and its vast web of state-linked industries face billions of dollars in looming debt repayments. Due to troubles faced by tourism and aviation sector, Dubai faces a major decline in revenue.
Additionally, Dubai also earns a lot of revenue from traded goods that are re-exported to Iran via Dubai route as many countries can’t directly deal with Iran.
“They facilitate the transport and the buying of things and the movement of people,” said Karen E. Young, a scholar at the American Enterprise Institute who studies Gulf Arab economies. “That’s not the world we’re living in right now.”
Dubai’s dedication to global trade is memorialized in the first sentence of the first article of its 50-Year Charter, something created last year by its ruler, Sheikh Mohammed bin Rashid Al Maktoum, who has overseen much of the city’s growth.
“Dubai is destined to be a crossroad between East and West, and between North and South,” the charter says.
Prior to the pandemic, it reached that status. Dubai International Airport for years has been the world’s busiest for international travel. Its vast Jebel Ali Port ranks high globally for its cargo operations.
That economic diversity stems from the classic retelling of Dubai’s story. After discovering oil reserves, but none nowhere as large as those in neighboring Abu Dhabi, then-ruler Sheikh Rashid bin Saeed Al Maktoum warned it would be a finite resource to the city-state.
To protect against that, Dubai became a company town. The state-owned long-haul carrier Emirates flies in foreign workers and tourists alike, who buy alcohol from state-owned duty-free shops, live in housing largely built by state-linked developers and hold credit cards from state-backed banks.
The wider nexus webs out into something U.S. diplomats have called “Dubai Inc.” Much of it worked, up until the pandemic.
“The aggregate of all those crises we faced in the past doesn’t equal this one,” said Tim Clark, president of Emirates airline, on an April 29 conference call.
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