Dubai to post 3.5% growth in 2018
By Staff Report
Published: Wed 10 Jan 2018, 8:48 PM
Last updated: Sun 28 Jan 2018, 1:44 PM
Dubai economy is projected to grow 3.5 per cent in 2018, thanks to diversification and positive impact of global trends, says a new report.
The "Dubai Economic Outlook" report identified a number of key factors influencing the future of growth in Dubai in the coming period. The most important of these are the hosting of Expo 2020, the implementation of the Dubai Industrial Strategy 2030 and the Dubai 2021 Plan.
The emirate's real GDP grew to Dh376.8 billion in 2016, up 2.9 per cent from previous year. The Government of Dubai has in recent years adopted a fiscal policy to rationalise public spending by reducing budget deficit as a percentage of GDP from two per cent in 2010 to 0.4 per cent by 2013.
Dubai has since maintained balanced accounts in 2015 and 2016 following which the government adopted an expansionary fiscal policy to stimulate the economy. The emirate's success in reducing the budget deficit helped stabilise macroeconomic factors and resume growth in various sectors, especially banks, financial markets, trade, tourism and real estate.
Released by Dubai Economy, the report noted that the emirate ranked third in the world in terms of openness after Luxembourg and Hong Kong, with a high degree of dependence on foreign trade for income. Dubai's openness ratio was 321 per cent in 2016, meaning that trade flows were more than three times higher than the net value added in the economy.
The total value of Dubai's trade in non-oil goods was Dh1.28 trillion in 2016, but its trade balance has been characterised by a permanent deficit as Dubai is a global hub for global and regional trade.
Dubai's imports are much more than its total exports as most imports are transported to other emirates and to neighbouring countries without them being registered as re-exports. Dubai's unique geographic location as a link between Asia and Europe, as well as its excellent cargo and air transport links and free zones, make it an attractive location for international companies to participate in global value chains (GVCs).
The report noted that growth in exports of high-tech products can be achieved through active participation in global value chains that will help them gain competitiveness in world markets. There are many consumer products produced and marketed within GVCs that allow companies in many different geographic locations around the world to collaborate with each other to manufacture one product. Dubai's logistics network and excellent air, sea and land transport capabilities, as well as its strategic location between East Asia and Western Europe, will facilitate its economic transformation.
The report predicted that due to rising interest rates in 2017 coupled with a liquidity contraction suggest that inflationary pressures will remain moderate in 2018.
FDI to recover in 2017-18
Total foreign direct investment (FDI) into Dubai stood at Dh270.8 billion between 2011 and 2015. In 2016, the emirate ranked 7th among the leading cities of the world attracting Dh25.5 billion in FDI. As an open economy, Dubai is affected by global trends but FDI receipts are expected to recover in 2017-2018.
Dubai's official statistics are divided into 19 independent sectors and seven of these accounted for 77.2 per cent of Dubai's GDP of Dh376.8 billion in 2016.
The sectors include wholesale and retail trade, transport and storage, financial services and insurance, manufacturing, real estate activities, construction, accommodation and food services, ranked according to their respective GDP contribution.
The manufacturing sector added Dh35.7 billion in 2016 - 9.5 per cent of GDP - and employed 250,854 workers in 2015.
According to the report, aggregate demand will be boosted by an additional Dh15 billion expected to be spent on roads and transport for Expo 2020 in government projects. The Dubai budget for 2018 has allocated Dh5 billion for 2018 and an equal amount for 2019 too.
The report noted that the challenge for Dubai is to transform the labour-intensive production sector and take a quantum leap to join the industrialised countries through productivity growth. The approach is based on intensifying the use of technology in manufacturing at the expense of labour, especially unskilled labour.
Dubai Industrial Strategy 2030 has identified six industrial sectors to spearhead its economic transformation: aviation, maritime, pharmaceutical and medical equipment, aluminum and metallurgy, machinery and equipment, and consumer goods. - email@example.com