Corona Virus and its Impact on UAE Economy
What were your plans for 2020? Was it a long-awaited vacation to Europe? Or a promotion at work? Or were you planning to purchase the new 2020 model RX luxury crossover? Or planning to invest into shares?
The truth is none of us foresaw this Great Lockdown or Great Shutdown, even when we were hearing the news, about Coronavirus cases in China. After completing just four months of this year where are we now?
Regardless of how late we are in this game, this pandemic will urge governments of all the countries to take serious measures and to double up their efforts to prevent further spread of this virus. UAE has always been a highly organized, technologically advanced, and well-funded county. The UAE has transformed its economy from a conventional, labour-intensive economy to one based on knowledge, technology and skilled labour. They have invested heavily in sectors such as aluminium production, tourism, aviation, re-export commerce and telecommunications.
Impact on Different Sectors
Given below are the various sectors which are hugely impacted by the coronavirus in the UAE.
As an international investment hub, the country has encouraged the contracting / construction sector with large mega-projects and the increase in social infrastructure for the preparation of the Expo 2020, which has now been rescheduled to 2021 due to the present scenario. The UAE has recorded the highest construction project value in both commercial and residential areas. The measures taken by the country for controlling the spread of the virus along with the already unexpected oil price war have wide-ranging ramifications for the construction industry. The UAE construction industry is expected to likely face shortages or indeed stoppages in materials being sourced due to the bans and restrictions in many countries. In these scenarios, we in CDA could advise and guide you through IFRS 15, in taking good decisions by looking into your Financial Statements and in the procurement of materials and assure the growth of your company.
Travel, Tourism and Hospitality Industry
The UAE's hospitality industry has been disrupted in Q2 of 2020 and is one of the hardest hit by the outbreak of Covid-19. With the UAE ceasing all flights including transit at the end of the first quarter of 2020, international hospitality demand has seen a clear decline. We see positive side for a comeback into the business from the end of Q3 2020 if industries conduct a proper study with the help of accounting and audit professionals and we in CDA are always ready to stand with you.
As lockdowns across the world have kept people inside, demand for oil has all but dried up. With an existing row between OPEC, the group of oil producers and Russia, the crude oil price had already been affected and now Coronavirus has driven the price down further.
Also read, How to Organize your Finance for 2020?
Effect in GDP
Let us now take a look at the GDP. Gross Domestic Product (GDP) is the largest quantitative measure of a country's total economic actions. More precisely, GDP signifies the monetary value of all goods and services produced within a country's geographic borders over a specified period of time. As informed by International Monetary Fund (IMF) in April, ‘the global economy is expected to shrink by 3.0% during 2020 in a stunning coronavirus-driven collapse of activity that will mark the steepest downturn since the Great Depression of the 1930s.’ All Investors fear that this pandemic will suppress the economic growth and that government action may not be sufficient to stop the decline. In response, central banks in several nations have reduced interest rates which will make borrowing cheaper and promote spending to boost the economy. Since the IMF’s latest forecast three weeks ago in April, the global economic outlook has worsened and the world can expect more waves of financial market turbulence.
Sourced from Gulf News
The above graph explains the Sectorial Contributions to UAE economy. While considering the GDP for UAE economy, the global factors when UAE implemented VAT, such as the decline in oil prices across the world, increasing trade and economic sanctions implemented on some countries of the region, slow growth of the global economy have a close connection. If the pandemic fades in the second half of 2020, we could expect global growth to rise next year. IMF had mentioned, the level of GDP at the end of 2021 in both advanced and emerging market and developing economies is expected to remain below the pre-virus baseline.
In line with the International Monetary Fund and World Bank’s recommendations for countries globally during the current pandemic, UAE has introduced relief measures which will help cushion the impact of the coronavirus. Special support packages are extended by each individual Emirates, to help smaller businesses and other vulnerable sectors of the economy to face this unprecedented crisis. Local lenders have informed about the payment holidays that would create a buffer in the coming three months.
Actions Taken by UAE Govt
Let us ponder on the thought-provoking statement by H.H. Sheikh Mohammed bin Rashid Al Maktoum in his recent virtual meeting, “Coronavirus is a health virus, an economic virus, and a political virus too and we say to all the countries of the world: It is the time for unity, cooperation and solidarity to fight the worst enemy of humankind. All differences diminish in the face of this challenge and the world can overcome it faster if the strong stood with the weak and the rich with the poor."
Let us stand together and cooperate with the measures the country has taken and will be taking for economic growth. There might be many unanswered questions in your mind regarding the current situation and the way into the future for your business or organization. We here at CDA are always waiting to clear your queries in a strategic approach for providing services to the customer and to withstand the competition. We also offer financial assistance by providing financial services such as Internal Auditing, Tax Auditing, Management Accounting and Bookkeeping and VAT Consultancy.
CDA has been well recognized in providing the accounting and taxation services for businesses regardless of its size. CDA also delivers a wide range of business services that include CFO Services, Accounting Software services, Due Diligence Services and Tax filing Services.
Our expert will give you one-hour Free Consultation to drive your fears away!