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Dubai's economy has nearly reached its pre-pandemic size, says report
The financial sector is expected to keep growing, supported by the listing of companies on the Dubai Financial Market and sustained momentum in the local private equity market
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Dubai has nearly reached its pre-pandemic size following a strong bounce back in the past two and a half years, driven by all the key strategic sectors.
Fitch Solutions, which provides insights, data and analytics, said the emirate’s economy has gained back around 98.0 per cent of its pre-Covid-19 size.
However, it expects that Dubai’s real GDP growth will decelerate from an estimated 4.2 per cent in 2022 to 3.4 per cent in 2023, amid lower oil prices and a higher cost of borrowing.
However, despite the slowdown this year, the growth will remain above the 2015-19 average of 3.1 per cent, it said.
“We believe that the ongoing rebound in the emirate’s key sectors, which have yet to fully recover from the pandemic, will keep growth above the historical trend in 2023. We expect activity in the wholesale and retail sector (which account for 26 per cent of total GDP) will pick up helped by a growing population and the sustained influx of tourists, especially those with elevated purchasing power,” it said.
The slowdown in the emirate’s growth relative to the rate in 2022 is largely due to fading base effects.
For instance, Fitch’s tourism team forecasted that tourism arrivals to the UAE will grow by only 10 per cent in 2023, after surging by 55 per cent in 2022, which will translate into slower growth in sectors such as accommodation and food services.
Dubai’s tourism sector continued its strong performance in April as the city attracted 6.02 million visitors during the first four months of 2023, up 18 per cent from the same period last year, but slightly below pre-pandemic levels by four per cent. The sector has set a new record for the number of visitors during Ramadan, according to Emirates NBD Research calculations, with 1.35 million visitors during the holy month, a 19 per cent increase from the previous year and a 50 per cent jump from pre-pandemic levels in 2019.
For 2023, Fitch projected that wholesale and retail, transportation and storage, financial and insurance, manufacturing, real estate, construction, accommodation and food and information and communication are the biggest contributor to the emirate’s GDP.
“We also anticipate growth in the transportation and storage sector will remain robust, benefiting from the normalisation of global trade, the recovery of Mainland China (the emirate's main trading partner), resilient demand in neighbouring GCC countries and the authorities increased efforts to boost foreign trade. The real estate sector will continue to be a key contributor to headline growth in 2023, amid higher demand for properties in light of growing population and residency schemes,” Fitch analysts said.
Moreover, it anticipated that the financial sector will keep growing supported by the listing of companies on the Dubai Financial Market and the sustained momentum in the local private equity market.
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