Business Bureau, Gulf Today

Government-led policy initiatives and investments, improved growth prospects in trading partners, and preparation to host Expo 2020 are providing the bedrock for increased private sector credit and investment in Dubai. As a result, real GDP growth rates in the short to medium term are projected to reach 2.1 per cent, 3.8 per cent and 2.8 per cent, in the years 2019, 2020 and 2021, respectively.

Economic momentum has picked up at the beginning of this year with a surge in new business licenses and improved optimism on jobs and business performance.

During the first three months of the year, 6,709 new business licenses have been issued, a 29 per cent increase over the same period of 2018. Similarly, the first quarter Composite Business Confidence Index (BCI) climbed up 10.2 points from the previous year and 7.7 points from the previous quarter, indicating a marked improvement in business prospects and overall sentiment.

The majority of businesses indicated their intention to place new purchase orders and subsequently expect volumes, revenues as well as profits to increase. The quarterly BCI survey conducted by the Department of Economic Development (DED) also indicated that 59 per cent of companies are optimistic about growth in Q1 2019, compared to 41 per cent for the same period of 2018, and 34 per cent expect stability; 7 per cent of businesses expect a decline in growth, down from 8 per cent a year ago.

During the first quarter of this year, the Dubai Financial Market General Index gained 4 per cent. Net foreign investment in the market during the first three months of the year reached Dhs680 million and accounted for 65 per cent of the total trade in DFM. Institutional investors accounted for Dhs492 million of the first quarter investment, underlining their growing confidence in Dubai’s economy.

Under the leadership of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, UAE Vice-President and Prime Minister and Ruler of Dubai., and follow-up by Sheikh Hamdan Bin Mohammed Bin Rashid Al Maktoum, Crown Prince and Chairman of the Executive Council, the Government of Dubai took decisive actions to accelerate the rate of economic growth in the Emirate that reached 1.7 per cent in the first half of 2018.

Major policy initiatives were introduced and contributed to reducing the cost of doing business, boosting SME liquidity, and supporting the tourism and the real estate sectors. Inflows of foreign direct investment (FDI) into Dubai also accelerated and reached Dhs38.5 billion in 2018, an increase of 41 per cent over its 2017 level. These and other initiatives contributed to accelerating growth during the second half of 2018 to 2.2 per cent, resulting in overall real GDP growth rate in 2018 of 1.9 per cent.

The achievements were realised despite the considerable headwinds that the world economy was facing in 2018. Rising trade tensions, declining growth in countries like China with commensurate relatively low oil prices, regional and global geopolitical risks including uncertainty about Brexit had adverse effects on confidence and investment plans, and reduced global growth and its prospects. Increased regional tensions further moderated global growth and prompted stock markets sell offs amid increased risk aversion among investors.

Unsurprisingly, most international economic organisations, including the World Bank and the International Monetary Fund (IMF), kept on revising downward their global growth outlooks for 2018 and beyond.

In January 2019, His Highness Sheikh Mohammed Bin Rashid Al Maktoum announced his 50-year Charter. As has always been the norm, His Highness’ Charter anticipated the challenges ahead and articulated a set of balanced, integrated, and flexible policy initiatives that will accelerate development and ensure sustainability and prosperity in the Emirate. Importantly, the Charter reaffirmed Dubai’s fundamental policy principles as a free and open market economy, and a preferred destination for foreign and domestic investments.

In light of the 50-year Charter and the strategic initiatives and investments that the Government of Dubai has embarked on, and taking into account regional and global growth prospects, DED’s latest economic study shows that Dubai’s economy is forecast to grow by 2.1 per cent in 2019, and by 3.8 per cent in 2020, and 2.8 per cent in 2021.

Dubai government is currently engaged in developing new growth drivers to be fully prepared for future changes in the global and regional economic landscapes, including where matters concern artificial intelligence, the Internet of Things, and the Fourth Industrial Revolution. Initiatives are underway to attract private sector investments in new innovative sectors and expand to regional and global markets. As such, the projected growth rates reported above represent a low case scenario for future growth.

Expo 2020 Dubai represents a strategic investment in the on-going transition of the Emirate into a knowledge-based economy underpinned by creativity, innovation and global collaboration.