Government-led policy initiatives and investments, improved growth prospects in trading partners, and preparation to host Expo 2020 are providing the bedrock for increased private sector credit and investment in Dubai. As a result, real GDP growth rates in the short to medium term are projected to reach 2.1%, 3.8% and 2.8%, in the years 2019, 2020 and 2021, respectively.
Economic momentum has picked up at the beginning of this year with a surge in new business licenses and improved optimism on jobs and business performance. During the first three months of the year, 6,709 new business licenses have been issued, a 29% increase over the same period of 2018. Similarly, the first quarter Composite Business Confidence Index (BCI) climbed up 10.2 points from the previous year and 7.7 points from the previous quarter, indicating a marked improvement in business prospects and overall sentiment. The majority of businesses indicated their intention to place new purchase orders and subsequently expect volumes, revenues as well as profits to increase. The quarterly BCI survey conducted by the Department of Economic Development (DED) also indicated that 59% of companies are optimistic about growth in Q1 2019, compared to 41% for the same period of 2018, and 34% expect stability; 7% of businesses expect a decline in growth, down from 8% a year ago.
During the first quarter of this year, the Dubai Financial Market General Index gained 4%. Net foreign investment in the market during the first three months of the year reached AED 680 million and accounted for 65% of the total trade in DFM. Institutional investors accounted for AED 492 million of the first quarter investment, underlining their growing confidence in Dubai’s economy.
Looking back to 2018: Resilience and Growth despite headwinds
Under the leadership of His Highness Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice-President and Prime Minister and Ruler of Dubai., and follow-up by His Highness Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince and Chairman of the Executive Council, the Government of Dubai took decisive actions to accelerate the rate of economic growth in the Emirate that reached 1.7% in the first half of 2018.
Major policy initiatives were introduced and contributed to reducing the cost of doing business, boosting SME liquidity, and supporting the tourism and the real estate sectors. Inflows of foreign direct investment (FDI) into Dubai also accelerated and reached AED 38.5 billion in 2018, an increase of 41% over its 2017 level. These and other initiatives contributed to accelerating growth during the second half of 2018 to 2.2%, resulting in overall real GDP growth rate in 2018 of 1.9%.
These achievements were realized despite the considerable headwinds that the world economy was facing in 2018. Rising trade tensions, declining growth in countries like China with commensurate relatively low oil prices, regional and global geopolitical risks including uncertainty about Brexit had adverse effects on confidence and investment plans, and reduced global growth and its prospects. Increased regional tensions further moderated global growth and prompted stock markets sell offs amid increased risk aversion among investors. Unsurprisingly, most international economic organizations, including the World Bank and the International Monetary Fund (IMF), kept on revising downward their global growth outlooks for 2018 and beyond.
Looking ahead: The short to medium term outlook for Dubai
In January 2019, His Highness Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice-President and Prime Minister and Ruler of Dubai announced his 50-year Charter. As has always been the norm, His Highness’ Charter anticipated the challenges ahead and articulated a set of balanced, integrated, and flexible policy initiatives that will accelerate development and ensure sustainability and prosperity in the Emirate. Importantly, the Charter reaffirmed Dubai’s fundamental policy principles as a free and open market economy, and a preferred destination for foreign and domestic investments.
In light of the 50-year Charter and the strategic initiatives and investments that the Government of Dubai has embarked on, and taking into account regional and global growth prospects, DED’s latest economic study shows that Dubai’s economy is forecast to grow by 2.1% in 2019, and by 3.8% in 2020, and 2.8% in 2021.
Dubai government is currently engaged in developing new growth drivers to be fully prepared for future changes in the global and regional economic landscapes, including where matters concern artificial intelligence, the Internet of Things, and the Fourth Industrial Revolution. Initiatives are underway to attract private sector investments in new innovative sectors and expand to regional and global markets. As such, the projected growth rates reported above represent a low case scenario for future growth.
Expo 2020 Dubai represents a strategic investment in the on-going transition of the Emirate into a knowledge-based economy underpinned by creativity, innovation and global collaboration. According to a detailed study, the contribution of Expo 2020 Dubai to gross value-added over the period 2013-2030 has been estimated at AED 122 billion. During the period 2013 – April 2021, construction and delivery of the Expo site are expected to contribute AED38 billion with direct benefits to the construction, business and financial services, transport, storage, and communication sectors. The event itself is expected to add another AED23 billion to gross value-added through on-site and off-site expenditures with direct benefits to the tourism, communication, business and financial services, transport, real estate, and retail sectors. The quantifiable elements of the legacy that Expo 2020 Dubai will create between May 2021 and 2030 has been estimated at AED62 billion. An important aspect of Expo 2020 Dubai is the direct boost it will give to the small and medium enterprises operating in Dubai who are expected to receive close to AED5.2 billion in new business up to April 2021 when the event ends. – email@example.com