Exports And Tourism To Bolster Dubai Growth
BMI View: Our expectation for Dubai's economy to undergo rapid economic growth has been underlined by recent tourism and export figures. Overall, we forecast real GDP growth for Dubai of 4.3% in 2014 and 4.5% in 2015, making the emirate the fastest-growing in the UAE.
Our bullish outlook on Dubai's economy over the coming quarters has been reinforced by recent data on tourism and re-exports, two areas where we expect rapid growth in the coming quarters. We forecast real GDP growth for Dubai of 4.3% in 2014 and 4.5% in 2015, following an estimated 4.1% in 2013. This will make Dubai the outperformer among the seven emirates of the UAE (see: 'Dubai Economy Going From Strength To Strength' June 4). We expect Dubai to continue seeing double-digit growth rates in tourist visitors over the coming months and years on the back of ongoing political instability across the Middle East and North Africa region, which has greatly benefited Dubai as a 'safe haven' for leisure travellers and investors. Latest figures from Dubai's airports show 6.2mn passengers in April 2014, an increase of 13.7% year-on-year (y-o-y). Hotel occupancy rates have remained robust, averaging 86.1% in Dubai for 2013, up from 82.6% in 2012. In addition, development of large-scale projects, such as the USD600bn theme park Dubai Adventure Studio and the Dubai Art Museum will ensure that leisure tourism increases at a rapid clip. Over the longer term, Dubai's hosting of the World Expo in 2020 will bolster the emirate's retail as well as hotel and restaurant sectors which accounted for 29.2% and 5.0% of GDP respectively in 2013.
As well as the booming tourism industry, Dubai's re-export sector will provide a further fillip to growth. Re-exports accounted for 8% of the emirate's economy in 2011, but were substantially hit by sanctions against Iran, the destination for almost a third of the emirate's re-exports. With a slight easing of sanctions against Iran, re-exports have grown by 14.1% y-o-y in Q413, the second highest growth rate in the past three years. Whilst sanctions will not be lifted completely any time soon, we expect further limited relief in sanctions over the coming quarters - opening potential for trade in metals, telecommunications and automobiles (see ''Permanent' Nuclear Deal Remains Distant', July 21).
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