Dubai's economy seems to be gaining momentum once again. But is it a temporary bump due to unrest in other parts of the Middle East or is the recovery on sounder footing? And, can Dubai be great again?
May 1, 2011
01 May 2011 Dubai's economy seems to be gaining momentum once again. But is it a temporary bump due to unrest in other parts of the Middle East or is the recovery on sounder footing? And, can Dubai be great again?
Dubai's economy, which was once the envy of its regional rivals, has struggled since the global financial crisis. But there are many indicators that suggest the emirate's economy has turned a corner.
While some critics may think Dubai has benefited from a 'flight to quality' as funds, tourists and business opportunities fled from Bahrain and Egypt to Dubai, the resugrence seems to be on sounder footing.
There are still many issues to contend with before this bump can transform into a full-blown recovery. The real estate sector and the country's debt obligation are issues that will be an overhang on the economy, but the country's unparalleled infrastructure, communciations and transportation, and all-round high quality of living could ensure that the emirate has gotten has gotten 'over the hump' and is on its way to recovery. But expect a few nasty surprises along the way, especially if some of the government-related enterprises (GRE) default or the Middle East's troubles escalate.
IS DUBAI BACK? Dubai spin doctors have made a career out of telling the world how regional troubles are beneficial for Dubai. Gulf War 1? Think of how Dubai will be the logistics hub. Iraq War? Dubai will be the hub for Iraq-focused companies. Trouble in Iran/Afghanistan/Pakistan/Lebanon? Think of the money that will flow into safe -haven Dubai.
This argument, however, wore thin over the past few years after Dubai saw its economy battered in the aftermath of the global financial crisis. Suddenly, its business model seemed full of holes, its most ambitious company Nakheel, became its biggest embarassment and the real estate went kaput. The spin doctors themselves lost their jobs.
But the Arab Spring is blowing favourable winds Dubai's way again.
"Dubai, as the region's safe haven, is benefiting from a flight to quality. This applies to tourism and retail, as well as the financial sector," says Standard Chartered bank, which thinks Dubai will be one of the "winners" of Middle East turmoil.
The Dubai economy seems to have turned a corner and analysts who have been watching Dubai for years have observed that positive news coming out fo the emirate outnumbered bad news in the first quarter of the year. That is a huge change from the spate of bad news from Nakheel, Dubai World and the wider real estate, tourism, retail and financial market meltdown that had characterised the emirate's economic fortunes over the past few years.
