Dubai’s economy will continue to grow in 2012 despite persistent contraction in its once rapidly-booming construction sector, thanks to healthy trade and tourism, an official and economists said last Wednesday.
Growth in the emirate’s GDP is ‘expected to be over 4.5 per cent this year’
Growth in the GDP of the debt-laden emirate is “expected to be over 4.5 per cent this year,” said Sheikh Ahmed bin Saeed Al-Maktoum, the head of the Dubai Economic Sector Committee.
The forecast by Dubai’s Department of Economic Development (DED) is also around 4.1 per cent for 2012.
This is a “respectable rate” driven by over six percent growth in tourism, and similar rates in trade and manufacturing, in addition to transport, said DED chief economist Mohammad Lahouel.
The growth will continue “despite a continued decline in construction,” he said at the Dubai Economic Outlook 2012 forum.
Lahouel said the final figures on GDP growth achieved in 2011 were not out, though he expected they should be around three per cent, a “little bit over (the) two per cent,” achieved in 2010.
Standard Chartered’s Marios Maratheftis agreed with the positive outlook for Dubai, but he put the forecast for growth rate in 2012 at 2.4 per cent.
“We think it is good given that 2011 was a good year,” said Maratheftis, the bank’s head of research for Western Hemisphere.
A slower rate of growth is not bad news because the quality of growth is improving, he said.
“The fundamentals of Dubai are pretty healthy and strong. Construction will continue to be negative, but I think it is good news because focus is shifting towards productive sectors,” he said.
“It shouldn’t be about the rate of growth but about the quality of growth,” he added, highlighting that the retail sector “is doing well, if not booming” while hospitality is also doing very well.
Dubai’s economy contracted in 2009 after being hit by the global financial crisis which dried out international finance and brought its property sector – which grew at break-neck speed over five years – to a shrieking halt, shedding around 60 per cent of its value so far.
But the economy picked up pace, banking on its developed tourism and retail sectors, as well its traditional trade sector.
Dubai sent jitters throughout global markets in November 2009, when it said it needed to freeze payments on some €20 billion of debt owed by its largest group, Dubai World. But the conglomerate succeeded in reaching an agreement with lenders to restructure €11.2 billion of debt.
The debt on Dubai’s government-related entities is estimated at €76 billion.
Last Tuesday, Dubai-based real estate giant Emaar Properties announced a 27 per cent drop in 2011 net profit to €372 million.
The 1.794 billion dirhams net compared with 2.448 billion dirhams (€505.6 million) a year earlier, the company said.
Net operating profit was at €426 million in 2011, down 32 per cent from €628.3 million. But net profit in the fourth quarter surged 161 per cent to €148 million.
Losses due to provisions made for impaired assets reached €54.6 million, compared to write-offs of €110.35 million, it said.
The company behind major property developments in Dubai, including the world’s tallest building, Burj Khalifa, said annual revenues fell 33 per cent to €1.678billion from €2.51 billion. But it boasted that its Dubai Mall was the world’s most visited shopping and tourism destination, marking record visitor numbers of 54 million people in 2011.
Shopping malls and retail businesses contributed €443 million to annual revenues, or 26 per cent of the total, and 13 per cent higher than their €393 million a year earlier.
Revenues from Emaar’s hospitality and leisure business rose 22 per cent, contributing €252 million in 2011, or 15 per cent of total revenues, compared to €207 million.
“The robust financial performance of Emaar in 2011 is a testament to Dubai’s status as the Middle East region’s business and lifestyle hub,” said chairman Mohamed Alabbar.
“With The Dubai Mall hosting more than 54 million visitors, the city has firmly established its global credentials as an international business and leisure destination,” he said.
“This status perfectly complements the strategically diversified business interests of Emaar, supported by our shopping malls and retail and hospitality and leisure businesses, which achieved solid growth in their contributions to recurring revenues in 2011,” he added.
Revenues from international operations almost doubled to€375 million from €201 million,with its share of revenues increasing to 22 per cent from eight per cent.