Dubai economy set to expand 4.5% in 2022

 

Dubai economy will continue to expand at a good pace this year, backed by the strong recovery in key sectors and successful Expo 2020.

The emirate’s economy could expand by 4.5 per cent this year as almost all the major industries are seeing an upward growth trajectory this year including hospitality, food and beverages, real estate, wholesale and retail, transport, manufacturing and financial services. The economy’s growth phase started in the second quarter of last year after a tough 2020. But the growth is expected to moderate this year.

Preliminary data from the Dubai Statistics Centre showed economy growing 6.3 per cent year-on-year in the first nine months of 2021, underpinned by a strong rebound in hospitality, trade and real estate sectors. After contracting by 3.7 per cent in the first quarter, the economy expanded 17.8 per cent and 6.3 per cent in the second and third quarters of 2021, respectively.

“We had pencilled in growth of four per cent for Dubai in 2021 but the data through September, and expected growth in fourth quarter of 2021, suggest that there is significant upside risk to this forecast. We now estimate Dubai’s economy grew around 5.5 per cent for the full year 2021. With headwinds to growth in 2022 including slower global growth, higher interest rates and a stronger dollar, we expect growth to slow in 2022 to four per cent to 4.5 per cent,” Khatija Haque, head of research and chief economist at Emirates NBD Research.

The 2022 projections of the Emirates NBD are in line with the overall growth rate of the UAE economy projected for 2022 by the Central Bank. The apex bank expects the economy to expand by 4.2 per cent in 2022.

“While growth is likely to slow somewhat in 2022, Dubai’s economy will continue to recover from the pandemic-related contraction in 2020,” said Haque.

Dubai GDP contracted -10.9 per cent over the course of 2020 but the economy and good progress with the recovery. But it was still not back to pre-pandemic levels of real output by the end of Q3 2021, Emirates NBD said.

In the first nine months of 2021, real estate services saw strong growth of 23.3 per cent during the first 9 months of 2021, more than making up for the contraction in the sector in 2020. “Low interest rates, demand for larger units and increased foreign demand for homes in Dubai supported the recovery in the real estate market last year,” added Haque.

While the wholesale and retail trade sector also benefitted from the normalization of economic activity and the recovery in consumer demand last year.

Among the other sectors, transport and storage, manufacturing, financial services and the arts and entertainments sectors also posted positive GDP growth last year.

However, some sectors contracted in the first nine months of 2021 relative to the same period in 2020. Oil and gas GDP declined more than -8 per cent year-on-year, information and communication contracted -1.9 per cent and the government services sector declined -2.4 per cent. Construction GDP shrank -0.7 per cent.