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The much acclaimed Expo 2020 win by Dubai and the imminent prospect of an upgrade to the coveted emerging market status will add dynamism to the economy. — KT photo by Leslie Pableo
The UAE, the Arab world’s second largest economy, is set to finish 2013 at 4.5 per cent growth, at a pace faster than the forecast made by the International Monetary Fund, and pick up added momentum in 2014 on the back of a host of factors that have never been so promisingly buoyant and specifically growth-oriented.
The much acclaimed Expo 2020 win by Dubai and the imminent prospect of an upgrade to the coveted emerging market status will add dynamism to the economy that is already on an upward trajectory, spurred by three critical sectors: huge non-oil sector investments, the buoyant trade and services sector, and the booming tourism industry.
The UAE Minister of Economy Sultan bin Saeed Al Mansouri echoed the upbeat sentiment as he projected that the country’s gross domestic product (GDP) would grow between four and 4.5 per cent in 2013. Al Mansouri has argued that despite the IMF’s predictions of weaker global oil prices in 2014, the UAE’s economy would surge ahead. Oil price impact on the economy will be limited as oil accounts for 30-33 per cent of the country’s GDP. The UAE has already set into motion a strategy to further reduce the dependence on oil to 10 per cent in future, the minister pointed out.
“In keeping with its Vision 2021, which seeks to make the UAE one of the best countries in the world by 2021, the UAE remains committed to its ongoing development and diversification of its economy,” said Al Mansouri.
The Ministry of Economy said in a report that the UAE’s economy has grown exponentially by nearly 231 times since the union was set up by seven emirates in 1971 and the growth catapulted the country to emerge as the second largest Arab economy after Saudi Arabia.
From Dh6.5 billion in 1971, the UAE’s GDP is expected to hit an all time high of Dh1.45 trillion in 2013. The ministry report projected that the UAE’s real GDP would grow by around 4-4.5 per cent this year, far higher than the rate recorded over the past five years of 2.3-3.5 per cent. The country’s non-oil trade surged by around 28 times over a period of 32 years to reach Dh1.2 trillion in 2012 compared with nearly Dh41 billion in 1981, the report said.
According to the Arab League, the surge in trade turned the UAE into the largest consumer market in the region after it overtook Saudi Arabia in imports. Imports of goods and services totalled $273.5 billion in 2012, the highest volume in the Arab world, accounting for almost 27 per cent of the region’s total trade of goods and services of around $1.022 trillion, according to the Inter-Arab Investment Guarantee Corporation (IAIGC).
In exports, the UAE came second, with about $314 billion, while it also was ranked second in terms of total trade of goods and services, handling nearly $588.5 billion. In 2012, the UAE was ranked third in the Arab world by GDP per capita, which stood at $45,731, according to the Washington-based Institute for International Finance.
Shaikh Abdullah bin Zayed Al Nahyan, Foreign Minister of the UAE, recently said that political stability, economic growth and a balanced foreign policy were key incentives luring world’s leading businesses to the UAE. Shaikh Abdullah said that the Expo 2020 win underlined the world’s confidence in the UAE, which is ranked 33rd globally in the Ease of Doing Business survey.
The UAE, which is seeking to enhance its economic competitiveness by diversifying its resources and by building a knowledge-based economy, also advanced five positions in economic competitiveness in the Global Competitiveness Report for 2013-2014 — from 24th in 2012 to the 19th in 2013. Shaikh Abdullah predicted that driven by research and development, the UAE would emerge as a regional hub for smart economy in the region. The UAE was ranked 23rd globally in the World Bank’s Ease of Doing Business report 2014. The UAE was ranked fourth globally in the Trading Across Borders category, up from its fifth ranking in 2013.
Standard Chartered, predicting a better 2014 across the world with the global economy picking up steam to rise to 3.5 per cent from 2.7 this year, and “inflation staying benign,” estimated that non-oil project spending in Abu Dhabi would reach $34 billion in 2014 in line with the emirate’s long-term development and diversification goals. The Dubai government’s Statistics Department said that the emirate’s economy is headed for the fastest expansion in six years as it benefits from an increase in hotel occupancy and manufacturing. Gross domestic product grew 4.9 per cent in the first half, compared with a 4.4 per cent increase in 2012.
Dubai’s real GDP grew to Dh169 billion in the first half of 2013 from Dh161 billion in the first half of 2012. In the backdrop of a rebounding Dubai economy, a key driver of the non-oil growth of the Emirates, the IMF is also expected to raise its economic growth forecasts for the UAE this year. The fund in September predicted GDP growth of four per cent.
Masood Ahmed, IMF’s director for the Middle East and Central Asia Department, said that Dubai’s rebounding property market, combined with a strong performance in trade, manufacturing, transport, and finance, had lifted its GDP to more than four per cent in the first half of 2013. “I’m sure this will feed through into the end of year numbers for the UAE as a whole and will end up being revised upwards.”
Analysts at Knight Frank observed that Dubai is recovering from a 65 per cent decline in property prices. Dubai’s booming economic scenario has been underscored by the emirate’s stock market, where shares listed on the Dubai Financial Market General Index have surged more than 90 per cent this year.
The second key driver of Dubai’s growth is its core trade and services sector that would continue benefiting from strong regional dynamics, “as bulging GCC fiscal surpluses drive long-term infrastructure and diversification projects,” Standard Chartered said in the Global Focus 2014 report.
In 2013, Dubai’s non-oil trade, which was up 16 per cent ($184 billion) in the first half, will end up almost 14-16 per cent higher than in 2012. “For 2014 we expect overall trade to grow 12-15 per cent. Driving this growth will be Dubai’s position as a gateway to 55 per cent of trade inflows to the GCC through its ports.” The bank expects investment levels in the region to remain strong, driving demand for capital goods imports and benefiting the emirate’s logistics and trade sectors.
Dubai’s tourism sector, the third key growth driver, is likely to have another strong year. “Hotel occupancy rates and tourist inflows to Dubai are very strong. In the first half of 2013, the number of tourists in Dubai reached 5.5 million, an 11 per cent increase over 2012. Dubai’s hotels reported 7.9 million visitors in the first nine months of 2013, up 9.8 per cent versus the same period in 2012.”
Dubai has total of 81,492 hotel rooms as of the first half 2013, which means the growth in occupancy is impressive: room stock in Dubai was almost 43,419 in 2009, when occupancy rates were around 68.8 per cent.
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