Global ratings agency S&P has forecast that the slew of factors including high vaccination rates for COVID-19 in the UAE, Expo 2020 and good performance of the non-oil sector will expand Dubai’s economy to 3.5 percent in 2021.
The UAE’s 85 per cent of the population has received two doses so far, resulting in a decline in the number of new coronavirus cases in the country and boosting confidence among the businesses and consumers. Dubai is also among the few cities in the world that have opened up for business since the outbreak of the pandemic.
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“The opening of Expo 2020 this month following a year delay is likely to provide a more muted boost to GDP growth than expected before the pandemic. We forecast visitor arrivals to Dubai will not return to 2019 levels until at least late 2022. However, the six-month event will improve hotel occupancy and increase footfall in malls, benefitting the retail sector,” S&P analysts said.
The non-oil private sector’s performance as measured by the IHS Markit Dubai Purchasing Managers’ Index has been above the 50-mark since June 2021, indicating faster growth in business activity on the back of improving demand.
“Although Dubai’s dependence on oil is not substantial, it has benefited from improved business sentiment and investment flows into the region due to the oil price recovery this year,” said Trevor Cullinan, primary credit analyst at S&P Global Ratings.
S&P pointed out that labour supply has been a key driver of economic activity in Dubai rather than productivity gains or capital investment. “We note that many people live in the emirates surrounding Dubai, especially Sharjah, and commute to Dubai for work. We understand this drives up the number of people working in Dubai by about 700,000 each day,” it said.
S&P projects population growth of a similar rate to its relatively modest medium-term real growth forecast of two per cent over 2022-2024. (AW)