Ratings agency S&P says Expo 2020 to drive economic growth in Dubai between 2019-22
Dubai's GDP growth is expected to pick up between 2019 and 2022 after growing at its slowest pace in nine years last year, according to new research from S&P Global Ratings.
The ratings agency said that a recovery over the next three years - averaging about 2.5 percent growth - would be supported by increased economic activity associated with Expo 2020 and, after that, by traditional growth engines such as trade and transportation.
In a new report, S&P said macroeconomic conditions in Dubai have deteriorated since 2013 in part due to lower oil pricesand the deterioration in regional political relations.
It added that residential property prices in Dubai have been declining over the past few years and are approaching levels last seen at the depth of the 2009-2010 property crash.
"We expect a marginal pickup in economic growth to 2.4 percent in 2019, with support coming largely from the construction and real estate sectors. We expect the completion of Expo 2020-related infrastructure projects and additional residential housing supply to enter the market from existing projects this year," said S&P.
It added: "A boost to tourism and related spending linked to Expo 2020 should drive somewhat stronger growth in 2020. However, after the Expo, economic growth will likely to ease in our view to around 2 percent through 2022, sustained by traditional growth engines such as trade and transportation."
The ratings agency said downside risks to growth have risen from trade and the real estate sector.
"In our view, 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," the report noted.
S&P Global Ratings has previously said it expects real estate prices in Dubai to fall by another 5-10 percent in 2019.
"However, a longer and deeper downturn in the real estate market than we currently anticipate could significantly dampen economic activity and increase pressure on government finances," it added.
Dubai contributes a significant amount to the nonhydrocarbon sector of the UAE, which represents about 70 percent of UAE real GDP. According to S&P estimates, Dubai's external trade accounts for about 72 percent of the UAE's total non-oil trade.
"We expect the UAE's economy will continue to face challenges in the medium term partly because of softer growth momentum in Dubai. The UAE's economic growth will pick up to 2.6 percent by 2020 from 1.7 percent in 2018 in part due to increased economic activity associated with the Expo," the report said.