Economic activity in Dubai has weakened in recent years, with the GDP growing last year at its slowest pace in nine years. However, increased economic activity triggered by Expo 2020 Dubai and traditional growth engines could pump up the emirate’s growth over 2019-2022.

S&P Global Ratings on Tuesday said that it expects a marginal pick-up in economic growth of the emirate to 2.4 percent in 2019, with support coming largely from the construction and real estate sectors. The economy grew by 1.94 percent in 2018, its slowest pace since a 2009 contraction when the economy was in the midst of a debt crisis.

"We expect the completion of Expo 2020-related infrastructure projects and additional residential housing supply to enter the market from existing projects this year," the report noted. 

The rating agency expects the GDP to grow averaging about 2.5 percent annually over 2019-2022, supported by increased economic activity associated with Expo 2020 Dubai and, after that, by traditional growth engines such as trade and transportation.

A boost to tourism and related spending linked to Expo 2020 should drive somewhat stronger growth in 2020.

However, after the Expo, economic growth is likely to ease to around 2 percent through 2022, sustained by traditional growth engines such as trade and transportation, it said.

According to the report, Dubai’s economic activity could be significantly dampened if there is a longer and deeper downturn in the real estate market than we currently anticipate and this could increase pressure on government finances.

In February this year, S&P said Dubai residential property prices will fall another 5 to 10 percent this year due to a continued gap between supply and demand, before steadying in 2020.

Relatively low oil prices, accompanied by slower regional demand and rising protectionism in the US and China, could further slow Dubai's transshipment trade flows, which have been sluggish since 2016.

Nevertheless, Dubai’s new economic stimulus plans to promote small and midsize enterprises and public-private partnerships could gradually increase the emirate’s long-term growth potential, the report said, adding, a new law to allow full foreign ownership of companies outside existing free economic zones should also encourage private investment and improve the business climate.

(Writing by Seban Scaria; editing by Mily Chakrabarty)


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