Dubai’s economy, largely driven by positive growth in the non-oil sectors, is clearly driving up the business confidence.
For the first half of 2019, the real Gross Domestic Product (GDP) grew by 2.1 per cent supported by resurgent growth in sectors such as transport and storage, which grew by 6.2 per cent. Wholesale and retail trade grew by 3.3 per cent and accommodations and food service grew by 2.7 per cent while real estate activities grew by 2.1 per cent.
The growth comes broadly in line with government’s own estimate of 2.1 per cent growth for 2019 and is aligned to forecasts by global institutions such as the International Monetary Fund (IMF) and the Institute of International Finance which pegged the real GDP growth above 2 per cent, in the beginning of the year, supported by the revival in key non-oil sectors.
The sustained growth comes at a time when the emirate has been facing headwinds from global trade disputes, regional geopolitical tensions and a rise in the real effective exchange rate of dirham (because of its peg to the dollar) applying pressure on some of the key sectors such as the real estate, retail, travel and tourism.
While revival in non-oil sectors lend credence to the sustainability of Dubai’s GDP growth, the overall fiscal stability of the UAE supported by strong large financial buffers, sizeable current account surplus and rising inflow of foreign direct investments will further improve business confidence
The resilience of Dubai’s economy supports the overall positive outlook for the UAE. The medium-term outlook for the UAE remains stable underpinned by sizeable sovereign wealth funds’ assets and the government commitment to forge ahead with reforms.
Various independent studies in recent months have indicated that business confidence in the UAE is on the rise supported by investments linked to Expo 2020 Dubai and Abu Dhabi’s fiscal support package.
A recent t HSBC study found that 83 per cent of the UAE’s businesses anticipate growth over the next 12 months, with at least 35 per cent looking to grow by 15 per cent or more.
Latest Purchasing Managers’ Index (PMI) figures for both the UAE and Dubai showed despite tough economic environment, business expectations towards future output growth improved in October.
Dubai’s non-oil firms continued to improve their output and the overall expansion was solid and the fastest since April. Firms were positive that new strategies and greater investment ahead of the Expo would lead to higher levels of activity.
While revival in non-oil sectors lend credence to the sustainability of Dubai’s GDP growth, the overall fiscal stability of the UAE supported by strong large financial buffers, sizeable current account surplus and rising inflow of foreign direct investments will further improve business confidence.