Travel restrictions triggered by the coronavirus outbreak in the Gulf region may pose the biggest risk to Dubai’s hospitality and tourism industry, analysts at ratings agency S&P Global told Reuters news agency on Monday.
All members of the Gulf Cooperation Council (GCC) – Saudi Arabia, Bahrain, Qatar, Oman and Kuwait – stand to suffer from the travel restrictions, but the business hub of Dubai, the capital of the United Arab Emirates (UAE), could see the biggest impact.
“Virus-related travel restrictions, if not lifted as we expect, could weigh on the GCC’s hospitality industry, but more so in Dubai, which received almost one million visitors from China in 2019,” the S&P said.
Mohamed Damak, senior director for S&P Middle East & Africa financial institutions, said there will certainly be an impact on visitors to the region, investments and potentially commodity prices if the virus is not contained by March and travel restrictions remain. In such a scenario, the number of visitors expected to attend Expo 2020 Dubai will also drop. Dubai had hoped to attract 11 million foreign visitors for the six-month event that kicks off in October.
The coronavirus has killed more than 1,770 people and infected more than 70,548 and is yet to show convincing signs of peaking, with more than 2,048 new cases reported on Monday. There have been nine confirmed cases of the new coronavirus in the UAE. Most of the people infected have been Chinese nationals.
Jihad Azour, director of the International Monetary Fund’s Middle East and Central Asia Department, said that it is too early to forecast the impact of the outbreak on economic growth in the Gulf. “We still need time in order to assess the magnitude of this shock and how long it takes for China to address it … we still need a few weeks to have clarity,” he said.
Bankers attending a trade finance event in Dubai on Monday said the coronavirus had not yet impacted trade flows in the Gulf but that companies were beginning to assess contingency plans in case Chinese exports are limited further over the coming months.
S&P analyst Zahabia Gupta said Oman’s economic downside risks were higher this year because of weaker oil demand and its exposure to China. About 45 percent of Omani exports, mostly oil, go to China, making it the most exposed of the Gulf Arab states to developments in that country.
Fiscal deficits in the region will rise next year because of expected higher spending, lower oil prices and weak growth, Gupta said, adding that Saudi Arabia’s fiscal deficit could hit 7.4 percent of gross domestic product this year and rise to 8.1 percent in 2021.