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How has the AED been affected by the pandemic, and what does this mean for Dubai businesses?


How has the AED been affected by the pandemic, and what does this mean for Dubai businesses?

The UAE was not immune from the economic fall out of the COVID-19 pandemic, although being a rich state beforehand, it was able to mitigate some more serious issues. The cornerstones of the business environment are transport, trade, and tourism, and following one of the world’s toughest lockdowns, there were impacts across all three. Tourism ground to a halt, the transport industry wasn’t in demand, and trade was slowed by disruptions across the supply chain. The International Monetary Fund estimated a 6.6% decrease in the GDP for the UAE in 2020. Part of this was also driven by low, falling to negative, oil prices.

That said, the government was swift to provide various fiscal and policy-based mechanisms to support the economy. A series of stimulus packages were passed, injecting more than 18% of the GDP, some 100 billion AED.

Staying on top of the markets

While the AED has performed well, all things considered, it’s still not a time for complacency. Those with businesses, startup entrepreneurs, and general investors need to stay on top of the performance of the AED against other currencies like the USD, EUR, and GBP.

Not only does this help to give a broad understanding of the overall economic situation in the region, but it can provide signals and tips for trading forex and other assets as well. From CFDs on sites like https://www.infinox.com/en to the exchange of the actual underlying asset, understanding market movements is the key to success.

What does this mean for Dubai businesses?

Source: Pexels

The pandemic resulted in issues with venture capital funding in the region but some sectors such as fintech and eCommerce managed to do quite well according to http://www.fintechtimes.com. During the first quarter of the year, funding to the region totaled $227 million, 2% higher than the year before. In the first half of the year, it was reported that more than 80 fintech companies set up in Dubai, making the region home to over 50% of all fintech companies in the MENA area.

According to http://www.gulfbusiness.com FDI was also up with a total of 310 companies registered between January and June, a 25% increase on the year before. This brings the total number of active companies in the region to over 2500. As well as new companies, many existing companies chose Dubai as a location or new headquarters or branches. These included Startupbootbcamp, Samba Financial Group, and Jiaozi Fintech Dreamworks.

Overall, despite generally tough economic conditions, Dubai was able to support its flourishing fintech sector. The pandemic didn’t deter investors or startups, and they worked with full support from the authorities.

As things begin to return to some kind of normality, it's hoped that the strength of the Dubai economy and AED will continue. A global increase in demand for fintech solutions, combined with a steady stream of budding entrepreneurs, should be enough to keep Dubai's business sector going. The main focus for businesses, going forward, will be flexibility and adaptability. Those that can adapt to the changing circumstances of the global economy and adapt their offerings accordingly, will be destined for ongoing success. Those that cannot, will not.

Published on 29-April-2021