Dr Omar bin Sulaiman, Governor of the Dubai International Financial Centre, or DIFC, said that although it took a few months for Dubai to adjust to the abrupt slowdown after several years of consistent fast growth, the signpost of recovery was visible by the end of January.
“We have seen a two per cent growth in real gross domestic product in the first three months of this year. It may get better over the coming months, and I expect an overall growth of between two and three per cent for the whole year,” he said.
Addressing the British Business Group, the DIFC governor said the UAE Central Bank’s conservative policies helped greatly to ward off the impact of the global financial meltdown on the nation’s financial services industry. “The Federal government and the Central Bank are working very closely to steer the economy back to normal with liquidity injection and other fiscal and monetary measures.”
Sulaiman said the major challenge the UAE economy faced at the onset of the meltdown was a crisis of confidence. People were shaken, and it took several months to come to grips with the new reality. “After speeding at 400km per hour, it will take some time to adjust if one has to slow down suddenly. That’s what happened with Dubai.”
Sulaiman maintained that the confidence level in the domestic economy had improved significantly, particularly after the successful $10 billion bond issue by the Dubai government. “The full subscription of the bond by the Central Bank helped to re-infuse confidence in the national economy by assuring that there is enough money in country,” he said.
International financial institutions have responded positively to the prospect of a second $10 billion tranche of bonds, which the government plans to issue soon, the governor said.
Asked how the Dubai government would deploy the second tranche of funds, he said most of the money would go into the economy, either as support for cash-strapped companies or through refinancing of corporate debts. On the slump in the real estate sector, he expected a rebound within the next few months as “the pricing was becoming right” to attract buyers.
“I firmly believe that the worst is behind us. For instance, even in January, DIFC received the same number of applications as in the same 2008 month for setting up new businesses. I expect Dubai and the UAE or the whole GCC will rebound much faster than the rest of the world as the confidence level is back and liquidity has started to build up.”
He said DIFC had put on hold its overseas investment plans in 2009. “We are still getting requests from other countries to set up DIFC-model operations. However, we will not focus on investing abroad for the next few months.” Quoting a recent survey released in London, Sulaiman said “Dubai still is the fastest growing financial centre even amid the global financial turmoil”
Sulaiman said Dubai’s real estate crisis differed from past property shocks in countries such as Singapore and Hong Kong. “In a way, we are lucky that it happened now as a result of the global turmoil. Even otherwise, it would have happened five to six years down the road given the fast pace of growth Dubai had been witnessing over the past few years.”
Drawing lessons from the crisis, Sulaiman said Dubai could improve efficiency at all levels. “We have changed the way we do business and become more cost-conscious.”
The study takes into account premium office rents of Dubai International Financial Centre (DIFC) and Abu Dhabi Global Markets (ADGM)
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