Policy responses in Saudi Arabia and the UAE to Covid-19

Data from TomTom’s Traffic index is one of the timeliest measures of mobility and can be used as an indicator for economic activity up to a point.  

Data from the index shows that congestion levels in some of the region’s key economic centres decreased substantially over the last week as governments and corporates enacted business continuity measures. In Abu Dhabi and Dubai we have seen congestions levels reduce substantially over this period and in Riyadh and Jeddah they are almost non-existent. Whilst such measures may cause significant short term challenges they no doubt pale in comparison to the implications of not enacting such measures.

United Arab Emirates

In the UAE, we have seen a swift enactment of policy from both the federal and from local governments in an attempt to support businesses and in turn residents at the current time. 

The federal stimulus in the UAE has primarily come in the form of an AED 100 billion stimulus package from the UAE Central Bank. The stimulus package aims, through monetary stimulus, easing of regulations and reduction in fees, to provide support for corporate and retail customers. Whilst there are a range of measures that have been enacted, the following advisory notes and mandates will be of particular importance to corporates and residents:

• The UAE central Bank has advised banks to use the funding provided to grant temporary relief of up to six months to corporates and retail clients 

• Increase in the loan-to-value (LTV) ratio applicable to mortgages for first time buyers by five percentage points

1. For a first time expat buyer this would increase the ratio from 75% to 80% for properties below AED 5 million and from 65% to 70% for properties above AED 5 million 

2. For a first time Emirati buyer this would increase the ratio from 80% to 85% for properties below AED 5 million and from 70% to 75% for properties above AED 5 million 

3. For both first time Emirati and expat buyers this would increase the maximum off-plan LTV from 50% to 55%. 

• Increase the maximum exposure banks can have to the real estate sector from 20% to 30%, with banks being required to hold additional capital if they surpass the 20% exposure threshold  

• The UAE Central Bank has mandated that all banks open bank accounts for small and medium enterprise customers within two days, providing all documentation and legal obligations are met

In addition to this, we have seen a broad range of measures introduced by the governments of Abu Dhabi and Dubai and various semi-private and private entities to support their respective economies.

Abu Dhabi

The Abu Dhabi government has announced a 16-point economic stimulus package, which seeks to support economic activity and reduce the cost of living in the Emirate. As part of the announcement, the government has also announced the continuation of all approved capital expenditure and development projects in the Emirate. Alongside this, we have seen various initiatives undertaken by private or semi-private entities to support businesses and residents.

Dubai

The government of Dubai has launched a AED 1.5 billion economic stimulus package over the next three months to support its economy. The package consists of 15 initiatives and focuses on the commercial sector, retail, external trade, tourism, and the energy sectors. After the initial three-month period, the package will be reviewed based on the then economic situation. Alongside this, we have seen various initiatives undertaken by private or semi-private entities to support businesses and residents.

Kingdom of Saudi Arabia

The government of Saudi Arabia has rolled-out two stimulus packages of SAR 50 billion and SAR 70 billion to support its private sector during the pandemic. The primary goal of the stimulus packages is to mitigate the impact of cash flow fluctuations on small and medium enterprises, which in turn is expected to support businesses and employment. A number of sub-committees have also been created as part of the latest stimulus round to study the impact of the virus on selected industries with further measures to follow as and when needed based on the recommendations of these committees.

Read the report