The Government of Dubai’s plans to maintain the pace of spending at 2018’s record level, with a focus on the development of infrastructure, indicates the emirate's intention to retain its competitive edge and continue to bolster its aviation and tourism sector, vital to its non-oil economic growth, analysts say.
Dubai, the commercial and trading hub of Arabian Gulf region, on Tuesday approved its 2019 budget, with higher revenue targets as it prepares to host the global trade fair Expo 2020 that is expected to bring millions of visitors to Dubai next year.
The Government is set to spend Dh56.8 billion, slightly higher than the Dh56.6bn for 2018 - then Dubai’s biggest budget ever and which was 19.5 per cent higher from a year-earlier period, it said in a statement carried by state-run WAM news agency.
The budget plan for this year includes an allocation of Dh9.2bn, specifically for infrastructure projects despite the fact that some of the Expo 2020-related developments are complete or nearing completion.
“Although most of the big projects are nearly done for the Expo, the Government maintained a Dh9.2bn on infrastructure to ensure the competitiveness of the emirate of Dubai internationally,” said Tariq Qaqish, managing director, asset management, at securities broker Menacorp Finance.
“The Government chose to take a deficit, although slightly lower than last year, but maintain spending, which is a sign of their commitment to maintain Dubai's position as leading [trading and commercial] hub.”
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Dubai estimates that public revenues will reach Dh51bn in 2019, an increase of 1.2 per cent year-on-year. Only 8 per cent of Government revenues this year are expected to come from the oil and gas sector. Non-tax revenues are forecast to account for 64 per cent of the total, while tax revenues are projected to come in at 25 per cent. Revenues from government investment represent just 3 per cent.
The expected rise in revenues comes despite the economic incentives taken by the emirate, which include the reduction of some business fees, a freeze in fee increases for three years, and a decision to not impose any new fee without providing a new service, according to the statement.
In June Dubai and Abu Dhabi announced they were exempting companies from administrative fines for at least the rest of the year, as part of efforts to stimulate business growth. Dubai unveiled in April plans to implement new measures to help boost economic growth, attract new investment and cut the cost of doing business across sectors ranging from tourism to financial services.
The emirate slashed aviation and municipality fees in July. The Government scrapped 19 fees related to the aviation industry as it seeks to attract more than Dh1bn of foreign investments into the sector, state news agency WAM reported at the time.
“The Government maintained the same momentum”, as the previous year due to population growth, the benefits of hosting Expo 2020 and continuous development of the infrastructure, Dubai Media Office said on Twitter after the budget was released. The emirate’s Vision 2021, which includes development of tourism and aviation sectors, is the driving force behind the economic momentum, it added.
“Dubai‘s economic growth [rose] 2.5 per cent year-on-year in 4Q17, driven by the emirates’ construction and hospitality sectors. The measures announced [reduction in fees] are likely to give these sectors a further boost,” National Bank of Kuwait, the biggest Kuwaiti lender, said in a report released on Wednesday.
“Indeed, the Dubai Economy Tracker index leapt from 52.5 [points] in October to a five-month high of 55.3 in November, as growth in the construction sector accelerated ahead of the Expo 2020. Tourism was also a major contributor,” it noted.
The 2019 budget plan estimates 2,498 new jobs as part of the Government's strategy for job creation; salary and wage allowances within the budget account for 32 per cent of total government spending. Spending on the social development sector such as health, education, housing, women and children's care, as well as reading, translation and programming initiatives, accounts for 33 per cent of total government spending in 2019, according to budget statement.
“Spending on health care and education indicates the commitments of the Dubai Government towards a better future for its citizens,” Mr Qaqish said.
