Economic recovery
U.A.E.’s key flagship airlines, Emirates Airlines and Etihad Airways, saw their earnings sink this year. The Emirates Group reported a 74% year-on-year decline in half-year revenues to $3.7 billion, as well as net loss of $3.8 billion, compared to $320 million profit in the same period last year. Meanwhile, Etihad Airways announced that its core operating loss for the first half of the year hit $758 million, mainly due to a 38% drop in revenues as passenger traffic fell by nearly 60%.
The Dubai Financial Market General Index fell 15% from the start of the year to record 2,354 points on November 22, 2020. This marks a 41.5% increase from its record low of 1,663 points in April 2020, as economic conditions improved and lockdown measures eased.
On another note, after the Abu Dhabi Securities Exchange’s general index hit its lowest level of 3,323 points in mid-March, losing 34% of its value, the market rose again to reach 4,974 points on November 22, 2020, minimizing its loss to 2% compared to the end of 2019.
The Central Bank of the U.A.E. and federal and local governments have introduced various fiscal measures and bank initiatives in an effort to mitigate disruptions on the economy. The central bank launched a Targeted Economic Support Scheme (TESS), releasing $70 billion to support liquidity needs, which roughly accounts for 20% of the country’s GDP.
On the fiscal front, the government announced an $8.7 billion stimulus package, which included: $4.4 billion approved by the federal government to support the private sector; $400 million in measures by the government of Dubai to reduce government fees and provide additional water and electricity subsidies; and $2.5 billion announced by the government of Abu Dhabi as part of the ongoing “Ghadan-21” fiscal stimulus program. Government spending is expected to have increased nearly 28% in 2020.
Promising signs of recovery have been evident in the most recent economic data. While employment declined on average in the second quarter, it almost recovered in June 2020, according to the central bank. The Department of Culture and Tourism in Abu Dhabi has also announced a 46% increase in hotel revenues in the third quarter of 2020 compared to the second quarter, with a 95% increase in the number of guests. In November, credit ratings agency Fitch assigned the U.A.E. an AA- rating with a stable outlook, marking the agency’s first rating for the federal government. Fitch attributed the rating to moderate consolidated public debt levels, high GDP per capita, and a strong net external asset position. Abu Dhabi’s rating is a notch higher at AA.