Dubai’s economy is set to expand by 4 per cent this year as the lower oil price benefits sectors such as trade and tourism, said a leading official.
Growth in India and the United States, as well as rising demand in Europe, would also boost the emirate, said Sami Al Qamzi, the director general of Dubai’s Department of Economic Development (DED).
“We are predicting an increase in tourism activities and retail and they are two of the main sectors in Dubai,” said Mr Al Qamzi.
“The drop in oil prices is good news to our trade partners.”
The UAE is forecasting growth to top 3.5 per cent this year, according to Sultan Al Mansouri, the Minister of Economy.
But the IMF has revised its growth forecast lower for the UAE to 3 per cent this year and 3.1 per cent next year, down from 4.6 per cent last year, as the oil slump results in weaker real estate and corporate activities.
The latest GDP forecast for Dubai has been revised higher because of an upturn in several sectors.
The emirate’s economy rose 4 per cent year-on-year in the first half of the year thanks to increased trade, retail, logistics and aviation activities, said Raed Safadi, the executive director of economic research and policy at the DED.
“All indications for us during the first two quarters indicate that we will hit 4 per cent growth this year and next year too,” he said.
“You have some pull factors including the lifting of sanctions on Iran, the pick-up in economic growth in the US, aggregate demand picking up in the European Union, compensating for whatever loss of Chinese deceleration in growth.”
The IMF forecasts that US$13 billion will be added to the UAE’s economy by the ending of sanctions on Iran, as trade between the two countries rises between now and 2018.
That is equivalent to a 1 per cent gain in real GDP growth each year over the next three years, according to the IMF’s annual report on the UAE’s economy.
In 2013, Iran accounted for 12 per cent of the UAE’s non-oil exports, valued at $12bn that year. Most of this came in the form of re-exports traded through Dubai’s Jebel Ali Port.
However non-oil private sector growth in Dubai is faltering, according to the seasonally adjusted purchasing managers’ index.
The index slowed last month as new hires grew at the weakest pace in three-and-a-half years, according to Emirates NBD.
The Dubai-based bank sponsors the monthly survey of business conditions in the UAE’s non-oil private sector by Markit, the financial information services company.
The travel and tourism sector is the weakest of the three sectors surveyed, but the bank expects activity to recover in the fourth quarter of this year, according to Tim Fox, Emirates NBD’s chief economist.
Meanwhile, inflation was expected to remain between 4.5 and 5 per cent this year, said Mr Safadi.
The IMF is forecasting inflation of 3.8 per cent this year, up from 2.3 per cent last year.
“Inflation will always be subdued up to a point, as aggregate demand is picking up and this is good news. We want to see inflation,” said Mr Safadi.
Follow The National’s Business section on Twitter