Defying global headwinds, Dubai's economy will accelerate this year, driven by tourism, transport and logistics and sound debt management, says a leading Dubai Government official
Tourism will help boost Dubai economy
The growth of Dubai's economy is expected to rise to 4.5 per cent this year, propelled by its key pillars of tourism, transport and logistics, says a leading government official.
Sound management of the emirate's debts was also helping to underpin the economy and the Government would continue to support state-linked companies to meet their needs, said Sheikh Ahmed bin Saeed Al Maktoum, chairman of the Dubai Economic Sector Committee.
"Despite all of the challenges we have faced in the year 2009 and the start of 2010 we have succeeded in encouraging the economy and promoting economic sectors," he said during the launch of the Dubai Economic Outlook 2012 in the emirate yesterday. Sheikh Ahmed's comments reflect a steady optimism about Dubai's outlook and its ability to meet its debt repayments this year, even as a fog of uncertainty hangs over the global economy. Still, his outlook is rosier than other forecasts.
Marios Maratheftis, the head of research west at Standard Chartered Bank said he expected growth of 2.4 per cent as Dubai showed "resilience" to the global choppiness. "I don't think our economy will be booming in 2012," he said. "It's hard to be booming when there are serious problems in the EU and in the US to some extent."
Sheikh Ahmed said GDP reached 3 per cent last year, up from 2.5 per cent the year before.
Dubai is striving to recover after the global recession brought to a halt nearly a decade of rapid debt-fuelled economic development. At its peak, yearly growth averaged nearly 18 per cent from 2000 to 2006.
The emirate is pinning its hopes on the three "Ts" of trade, tourism and transport as it shifts its focus away from property after prices plummeted by more than half. Non-oil trade expanded by 24 per cent in the first half of last year, and its ports, malls and hotels are busy.
But Dubai is still facing a challenge getting to grips with a maturing debt pile estimated at US$14 billion (Dh51.4bn) this year.
Investor confidence was lifted by the repayment of this year's first maturity, $500 million owed by the Dubai Holding conglomerate.
Jebel Ali Free Zone (Jafza) has also been holding talks about a $2bn sukuk that is due in November.
Focus is shifting to Dubai International Financial Centre Investments (DIFCI) $1.25bn repayment, due in June. "DIFCI is probably the one that requires the most intervention and we are watching how that resolves," said David Staples, the managing director of Europe, Middle East and Africa corporate finance at Moody's Investors Service. "The scale of debt relative to Dubai's is not substantial but the scale of the debt relative to DIFCI's earnings and cash flow is substantial." He said he believed the Government would intervene to help to achieve a successful resolution but any action posed "execution risks" given the state of the market.
Dubai set the ball rolling on its efforts to address its debt by agreeing last year a $25bn restructuring of Dubai World's debts.
If required, the emirate would increase the size of the Dubai Financial Support Fund, the specially created fund set up to support Dubai World and other state-linked firms, he said. But Sheikh Ahmed, who is also the chairman of Dubai's Supreme Fiscal Committee, said he was "pleased with the way business was going".
Reuters reported sources saying this month that the committee had abandoned talks on the $10bn restructuring of Dubai Group, one of three arms of Dubai Holding, a conglomerate owned by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai.