Diminishing influence from oil sector
Dubai economy well positioned for the future with growth to rise next year
Dubai’s economy is forecast to expand 3.6 per cent next year, compared with 2.9 per cent in 2016, as the economic drivers shift from trade to real estate, manufacturing and tourism, top officials said.
“Diversification, resilience and sustainability are enshrined in every project, policy and strategy that Dubai adopts,” said Sheikh Ahmed bin Saeed Al Maktoum, second deputy chairman of Dubai’s Executive Council and chairman of the Economic Development Committee. “The oil sector now makes up for less than 1 per cent of Dubai’s GDP, while varied initiatives have opened up unprecedented opportunities for global businesses in several non-oil sectors.”
The IMF is forecasting Dubai's GDP will grow 2.7 per cent for this year and 3.6 next year as investment and spending related to Expo 2020 continues to fuel growth. Dubai’s real economy, which grew 2.85 per cent last year, is forecast to grow 3.1 per cent this year, said Sami Al Qamzi, director general of Dubai Economy, in line with projections made in January.
Dubai plans to spend Dh47.3 billion this year, a budget that will be driven by a 27 per cent jump in infrastructure spending as the emirate prepares for Expo 2020.
“We see the investment programme largely driving the pick-up in economic activity in Dubai this year,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. “We see stronger activity linked to Expo 2020, including direct and associated infrastructure. Investment in the real estate sector also remains strong.”
About Dh11bn in construction contracts for Expo 2020 are expected to be awarded this year, with more than Dh2bn of those contracts going to small and medium-sized enterprises. Expo 2020 awarded Dh2bn worth of contracts last year.
“We also see a more favourable external demand backdrop, with stronger global growth and a weaker US dollar, which will also support a strengthening in GDP growth in 2017,” said Ms Malik. “This should support growth in a number of related sectors, such as tourism.”
Trade represented 28 per cent of Dubai’s GDP last year, followed by transportation and storage at 12 per cent and financial services accounting for 11 per cent, according to Sheikh Ahmed.
The transportation sector will be a catalyst for construction sector growth through projects such as the Dubai Metro extension, and the expansion of container terminals at Jebel Ali port, he added.
The government is forecasting the real estate sector will accelerate 4.3 per cent this year and 3.8 per cent in 2018, while the manufacturing sector will expand by 3.3 per cent this year and 4.1 per cent in 2018.
“Dubai is playing a major and increasingly sophisticated role in regional and global value chains through transport, distribution, marketing services and research & development,” said Sheikh Ahmed.
Growth in the tourism sector, which reached 11 per cent this year, will slow to 5 per cent this year and 5.1 per cent next year, he added, without giving a reason for the low forecast.