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29 March 2024

Dubai recovery getting broad-based: US bank

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By Staff

Dubai’s economic growth recovery is becoming more broad-based and gaining pace on the back of growth in property, tourism and trade sectors and also the diversification of the overall economy, Bank of America-Merrill Lynch said in a note.

After averaging 10 per cent annual growth from 2000-10 and a slump in 2009, real GDP growth was 4.4 per cent in 2012. With a fading drag from construction and real estate activity, growth likely accelerated to a preliminary 4.9 per cent in 2013, BoFA-ML said quoting Dubai's Department of Economic Development (DED).

The International Monetary Fund last week increased its growth forecast for the UAE on the back of Dubai’s World Expo 2020 win.

It raised UAE growth forecast  to 4.4 percent this year, compared with an estimate of 3.9 percent in October.

A Bank of America-Merrill Lynch team was recently in the UAE and held meetings with number government officials from different departments.

The DED, according to Bofa-ML, targets 4.7 per cent and 5 per cent growth in 2014 and 2015, respectively. Population growth also accelerated to 5 per cent in 2013, above government forecasts of 3.8 per cent.

The DED is likely to announce the Dubai Strategic Plan (DSP) 2015-21 by September, and is likely to incorporate ambitious but realistic growth objectives, it said.

"The DSP is likely to focus on productivity growth, including through regulatory framework improvements. The DED highlighted this was to alter the growth model, which historically has relied on factor accumulation (capital and unskilled and semi-skilled labor) with limited productivity gains," BoFA-ML said in its note released on Thursday.

Budget deficit likely to shrink

Quoting a presentation given to BoFA-ML team during the visit, it said that the Dubai’s Department of Finance (DoF) aims to shrink budget deficit from 0.4 per cent of GDP last year to 0.2 per cent this year.

Although expenditures are set to increase 11 per cent year-on-year, revenues are budgeted to increase 13 per cent annually on increased fee revenue collection (increase in Salik toll gates, metro use and a hike in property registration fees), it said.

Medium-term capital expenditures are guided toward $1-2bn for now, while the bulk of the Expo 2020-related capex is set to take place in 2016-20, the US bank said in its note after their recent visit to Dubai.