COVID-19’s Impact on the UAE’s Economy: Evidence of its reliance on policies of foreign countries

By Nicolas Sleiman

How did the pandemic expose the UAE’s reliance on policies in foreign countries? This article uses nighttime lights data to assess the economic impact of COVID-19 on the UAE. While the UAE lifted most restrictions relatively early, its economic growth was still heavily stunted due to lockdowns and travel restrictions in other countries. The travel industry, which is a massive contributor to the UAE’s GDP, suffered significantly when international travel was restricted during global lockdowns, affecting the country’s overall economy. 

Reproducible research: The code used in this study can be replicated using the code available on GitHub at the GitHub repository.

The COVID-19 pandemic and the lockdowns that resulted from it had a great effect on economies worldwide. Khan et al. (2022) studied nighttime lights data from 2841 cities globally from January 2020 to March 2021 to measure the true impact of COVID on cities. The authors found that every city suffered from the pandemic and lockdowns, with some suffering more than others, depending, for instance, on the income levels of the countries these cities were in or their population density. 

However, the authors did not look at the particular dynamics of the local economy of the cities that they were considering. It is important to study the dynamics of a particular country or city, as this will allow governments to see what can trigger a recession in their country, and in the case of a similar situation happening, they can adapt their policies to mitigate as much as possible the eventual effects of such a situation. It may also help other countries with similar economies also be able to adapt. 

I use nighttime lights to study the specific situation of the United Arab Emirates (UAE). The UAE was a very interesting example to look at. The COVID-19 pandemic allows us to truly see how much the UAE relies on restrictions and policies in foreign countries. In this article, we will be seeing why this may be the case and quantifying the reliance using nighttime lights data. Neighboring countries like Qatar and Saudi Arabia having similar dynamics could also benefit from such a study.

Context: Why does the UAE rely on foreign policies?

Figure 1: A Before and After Comparison of the UAE¹

The UAE has seen tremendous growth over the last few decades, for which there are two main explanations. The first reason is that Abu Dhabi has massive natural crude oil reserves. Being one of the most abundant sources of oil (at least for the next few decades) and as energy got more and more essential to our daily lives, countries had all the more incentive to engage with the UAE. In particular, countries such as India, Pakistan and Argentina get a big part of their oil supplies from the UAE.² 

The second reason, and the one we will consider here, is linked to its geography. The UAE has quite a central location on the globe, as one of the main and only connections between the East and the West. This is beneficial in a few ways.  Firstly, this attracts global business and investment, as companies often choose the UAE as a base of operations to connect with markets in Asia, Europe and Africa. This has helped the country establish itself as a hub for trade, finance and logistics, reinforcing its importance in the world. Secondly, it allows people to travel between continents very easily by making a layover in Dubai or Abu Dhabi. To show how significant these layovers are, we can take a look at travel data as shown in Figure 1, showing passenger movements through airports by emirate.

Figure 2: Passenger movements through airports by Emirate³

We can see that for the two most significant airports in the country (Dubai and Abu Dhabi), excluding 2020 and 2021 which are affected by the pandemic, almost half of the passengers travelling to these airports are simply transiting. Given the number of passengers going through both airports, in particular through Dubai, which is currently the second most frequented airport in the world, this is extremely significant. These factors lead to travel contributing to a massive portion of the country’s GDP. In 2023, this contributed to roughly 18.2% of the GDP.⁴ Therefore, any hit to the travel industry, and foreign country restrictions on travel, will massively affect the UAE. 

When relating this back to the pandemic, it is clear that passenger numbers fell sharply in 2020 and remained low throughout much of 2021. This is understandable, as travel restrictions were in place across much of the world during those years. Although the UAE itself recovered relatively quickly, with most major restrictions being lifted by June 2020 and resuming flights to over 80 international destinations, the uneven pace of recovery in other countries raises an important question: to what extent was the UAE’s economic growth affected during this period? To understand this, we analyze the nighttime lights dataset.

Evidence from the Nighttime Lights Dataset

The nighttime lights that were used for this study came from the Payne Institute.⁵ In order to truly quantify the impact of the pandemic, we need to analyze three time periods:

1. The pandemic period: for UAE, this period is between March 2020 and August 2021, roughly towards the start of EXPO 2020 which was delayed due to the pandemic. The following sub-periods were studied:
   • Every month between March 2020 and September 2020. This englobes the main lockdown period (March to June) and the subsequent months. The reason we look at each of the months is because, since the lockdown was short, downloading all the files was feasible and is therefore interesting to analyze.
   • The average growth between September 2020 and August 2021. While the lockdown has ended in the UAE, a lot of countries around the world are still extremely unstable during this period. I made the assumption that after August 2021, most places have already lifted major restrictions and start to go back to pre-pandemic activity levels.
2. A determined period before the pandemic. This is to check at what rate nighttime lights increased prior to the pandemic. This is a good point of comparison with the events of the pandemic and lockdown itself. We chose in particular to study the growth of the year prior (March 2019 to February 2020). We also looked at May and June 2019.
3. The recovery period, in particular from the EXPO 2020 period up until October 2023.

In order to see the change in nighttime lights over the periods specified above, we downloaded each of the necessary pictures for each month we are considering, cut out the UAE using the corresponding bounding box (51.58E-56.38E, 22.63N-26.05N)⁶ and, using a radiance datacube structure⁷, we are able to get the sum of lights (with respect to their coefficients) over the area within the area of the shapefile. The results thus obtained can be visualized as shown in Figure 2, showing the evolution of the sum of light intensity over time. 

Figure 3: Evolution of the Sum of Nighttime Light Intensity in the UAE from March 2019 to October 2023

An immediate observation is that while there was an overall decrease in nighttime light intensity during the lockdown month, which bounced back only in September 2020, there was a sharp increase in April 2020. The increase in April 2020 is due to the Ramadan period. Since the UAE is an islamic state with a great portion of its population belonging to islam itself, a lot of people fast during Ramadan. During this time period, usually lasting 29 to 30 days, people who fast are only allowed to eat at night. Thus, this leads to more people sleeping later at night (up until midnight or 1AM) and waking up much earlier in the morning (as early as 4 or 5AM) in order to eat. Therefore, residential areas exhibit much higher nighttime lights than usual during this period. This is the reason we also checked May and June 2019 where we notice similar trends as 2020. Thus, this increase has almost certainly nothing to do with the pandemic.

Looking back at the “bouncing back” period, we notice that while the nighttime light intensity bounced back to pre-pandemic levels by September 2020, the rate of increase for the following year is very different from pre-pandemic. While we can see it visually, we can also look at this mathematically by computing the log-log slopes between March2019 and February 2020 as well as between September 2020 and August 2021. This will allow us to get an average percentage change in nighttime lights for each month between these time periods. After doing the necessary computations, we get the following results (rounded to the second decimal):

• Between March 2019 and February 2020, the average monthly increase in nighttime lights intensity was roughly 0.35% per month.
• Between September 2020 and August 2021, the average monthly increase in nighttime lights intensity was roughly 0.14% per month.

This is quite a dramatic difference: the growth rate of total nighttime light intensity during the second period was only about 40% of the pre-pandemic pace (0.14% versus 0.35% per month). What makes this especially noteworthy is that by September 2020, most travel and mobility restrictions in the UAE had already been lifted. The question, then, is why the recovery in nighttime activity appears so much weaker than before the pandemic.

We can relate this back to the assumption regarding the UAE’s reliance on foreign economies. While the UAE was mostly back to normal, with most restrictions being lifted and Emirates and Etihad being allowed to travel to major destinations worldwide, the rest of the world was not. Some countries in Europe such as France went through multiple lockdowns and restrictions were constantly being lifted then reinstated.⁸ This instability did not incentivize people to want to travel, especially by plane. Other countries such as Australia were extremely difficult to enter during this time, so much so that even its citizens were not able to come back until much later⁹. Every country had their own experience with the pandemic which made travel extremely difficult. This translates very nicely when we compare this to the travel data from earlier. During this period, while generally all travelling decreased, layovers and transits decreased much faster than departures and arrivals. Moreover, DXB International Airport dropped to being the 19th most frequented airport, completely different to its top 4 position from the year prior¹⁰. Thus, recalling that the travel industry is a massive contributor to the country’s GDP, this heavily stunted the UAE’s economic growth. 

On the flip side, we can also look at what happened post-pandemic. Computing the log-log slope between August 2021 and September 2022, we see that the averageincrease between each month is roughly 0.76%. This is an astronomical increase compared to the previous period. This is because international policies have begun to loosen up on travel at this point. This is evident by the travel data as the numbers start to converge back to their original values by 2022. This increase is also inflated by increased tourism for EXPO 2020, which further strengthens the argument. However, computing the slope between September 2022 and October 2023, we find an average increase of roughly 0.31% per month. This suggests a return to normal since it matches the slope from the pre-pandemic period. Moreover, at this point, the number of travellers through the UAE has increased on every front compared to before the pandemic. 

Conclusion

This study on the effect of the COVID-19 pandemic and lockdown on the UAE shows just how much this country relies on the policies of countries around the world. Using the nighttime lights data and its evolution over time, as well as analyzing policies put in place by other countries, we were able to see that when the world is on lockdown, the UAE, even if itself is not on lockdown, suffers heavily as a result. This is very important for the UAE to take into account as it needs to be able to function independently of other countries and not be affected as much by them.

References:

Amjad Muhammed Khan, Hogeun Park, Mark Roberts, Putu Sanjiwacika Wibisana on November 22nd 2022 (Lights out: The economic impacts of Covid‐19 on cities globally) 

Footnotes:

1.  Dubai Social Circle –  https://dubaisocialcircle.ae/uae/dubai-1990/ ↩︎
2. Top 10 UAE Export Destinations for Crude Oil – https://ae.thedollarbusiness.com/blog/top-10-uae-export-destinations-for-crude-oil ↩︎
3. Passenger Movements through Airports by Emirate –  https://uaestat.fcsc.gov.ae/vis?tm=air%20transport&pg=0&snb=12&df[ds]=FCSC-RDS&df[id]=DF_PASSENGER_MOV&df[ag]=FCSA&df[vs]=1.6.0&dq=.A….&pd=2016%2C&to[TIME_PERIOD]=false ↩︎
4.  The value of air transport to the United Arab Emirates – IATA – https://www.iata.org/en/iata-repository/publications/economic-reports/the-value-of-air-transport-to-the-united-arab-emirates/ ↩︎
5.  Nighttime Lights Dataset: https://payneinstitute.mines.edu/eog/ ↩︎
6. Bounding Box (slightly adjusted): https://gist.github.com/graydon/11198540 ↩︎
7. Documentation for radiance datacube: https://xkdr.github.io/NighttimeLights.jl/dev/ ↩︎
8. Covid-19: France enters third national lockdown amid ICU surge – BBC – April 2021 – https://www.bbc.com/news/world-europe-56622471 ↩︎
9. Australia, COVID-19 and Travel Bans: Denying the Right to Return – March 2022 – https://blogs.griffith.edu.au/law-futures-centre/2022/03/28/australia-covid-19-and-travel-bans-denying-the-right-to-return/ ↩︎
10. Busiest Airports Worldwide – https://en.wikipedia.org/wiki/List_of_busiest_airports_by_passenger_traffic ↩︎