UAE tourism investments to hit Dh28.2b

Dubai - Visitor spending total $23.5b in 2014 and $26b in 2015

Visitor spending in the UAE is set to increase by 3.3 per cent in 2016 as the country is on track to attract more than 15 million foreign visitors, while tourism investments are poised to rise by 2.8 per cent to reach Dh28.2 billion in 2016, according credit insurance leader Coface.
Visitor spending totalled $23.5 billion in 2014 and $26 billion in 2015 - the equivalent of 60 per cent of all service exports and 5.4 per cent of all exports including goods and services, said Seltem Iyigun, Coface Mena economist.
However, the tourism sector is under pressure due to lower energy prices and depreciation of the Russian rouble and the euro, Iyigun noted in a report.
"Lower energy prices and the depreciation of the Russian rouble and euro against the dollar, are making the UAE a more expensive destination for Russian and European visitors. This is putting pressure on corporate performance in the hospitality sector," Iyigun said.
The UAE, the most-diversified economy within the Gulf region, is also projected to record a significant surge in total household spending to Dh267.1 billion in 2016, up from an estimated Dh241.8 billion in 2015.
Although the hydrocarbon sector remains the backbone of the UAE's economy, the large contribution made by non-hydrocarbon activities to gross domestic product is mitigating the effects of lower energy prices on economic growth, Iyigun said.
With plunging oil prices, the diversification has become especially important since mid-2014. As a result, the share of non-hydrocarbon sectors in GDP increased to around 75 per cent in 2015, up from around 65 per cent in the mid-2000s, said Iyigun.
"The country's relatively high level of economic diversification has made it less vulnerable to the shock in oil prices," the report said.
"Diversification efforts have helped the UAE to build up solid financial buffers that allow the government to continue supporting the economy's non-hydrocarbon activities such as real estate, construction, trade, retail and tourism."
In addition to its diversification, the UAE's safe-haven status, its political stability and its resilient financial system have also helped the country to limit the negative effects of lower energy prices.
"Although lower oil prices dampened investor sentiment at the end of 2015, household consumption remained solid, on abundant liquidity, low interest rates and continued tourism inflows. Loans to the private sector increased by 8.5 per cent in February 2016, compared to a year earlier. The country's economic diversification is supporting this outlook, as the slowdown in the oil sector has had less impact on employment levels," said the report.
Iyigun said the retail industry currently attracts 23 per cent of total foreign direct investment inflows to the UAE. "Despite its saturation, the retail sector still offers investment opportunities, encouraged by the country's robust infrastructure, advanced environment and mega-development projects."
The reported noted that the rising cost of rents is narrowing retail profit margins and a continued decline in oil prices could destabilise retail investments in the long term. Banks are also facing deteriorating liquidity conditions and dollar shortages, as government deposits in the banking system have dropped following the fall in oil prices.
- issacjohn@khaleejtimes.com