Will Postponement of Dubai Expo 2020 Bring Economic Relief?
Cancelled events, grounded flights and halted investments due to the COVID-19 pandemic have brought the United Arab Emirates to a standstill. The pandemic has made large gatherings of people the breeding ground of the virus, forcing the Emirati authorities to postpone Dubai Expo 2020 to next year.
The World Expo 2020 was largely considered as a means to save the falling economy of Dubai prior to the outbreak. Dubai and its state-linked industries have been under billions of dollars of debt repayments, which though bailed out a decade earlier but another cash infusion at this time cannot be expected considering the drop in oil prices.
Since 2014, Dubai’s real estate market has been suffering from a 30 percent decline. In the same year, the city announced to host the Expo 2020 that was expected to bring around 25 million visitors – a boon for the economy as well as real estate. Billions have been spent to enhance the infrastructure with an elaborate exhibition site and build a plethora of new residential apartments as well as shopping centres. The city has also expanded its public transit system to ease travelling for the visitors.
However, the postponement of the world fair and the pandemic have made sure that the slump in the real estate will continue for another year. Analysts estimate that the average sales price could further reduce by 11-12 percent by the end of 2020.
The coronavirus pandemic has disrupted all, pushing Dubai at the brink of a deep economic crisis from which it may not recover even if the World Expo takes place next year. The Dubai Expo 2020, which was scheduled to be held this year in October and will now be organised in October next year, would have played the role of a “crossroad between East and West, and between North and South”, as the 50-Year Charter created by Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum says.
Dubai, indeed had gained that status by serving and hosting the maximum number of international tourists in 2019. For years, Dubai International Airport and Jebel Ali Port have ranked high globally in terms of the busiest international airport and cargo operations respectively.
The pandemic has brought in the concept of social distancing, which has for sure disrupted the travel and tourism industry. And, it would be long before the industry revives to its fullest. It will be extremely difficult for the airlines to cope up with the pressure of social distancing as keeping seats empty would cost billions to airline groups in the long run.
Dubai’s state-owned flag carrier airline Emirates is one of the most preferred option for long-haul journeys. Recently, the Emirates Group took the hard decision of firing around 30,000 employees due to the economic crisis brought in by the coronavirus outbreak.
“The aggregate of all those crises we faced in the past doesn’t equal this one,” said Tim Clark, president of Emirates. “The airline industry cannot afford to have large numbers of its seats idle. It would be absolute economic catastrophe, worse than the current situation.”
As the World Health Organisation says that we will have to learn to live with the virus, and no vaccination is available as of now, there could be a huge drop in the expected number of visitors ahead of the Dubai Expo 2020 next year.
This will have a direct impact on the debt payments looming from the 2009 financial crisis over the Dubai government and the state-linked firms. By the end of 2020, Dubai would be slapped with a bill of $9.2 billion of debt due and a whopping $30.6 billion bill coming by 2023. While the UAE’s capital Abu Dhabi has the capacity to bail out its neighbour, the city itself might to have to take some tough decisions considering the falling prices due to the dramatic drop in the demand of oil – Abu Dhabi economy’s backbone.
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