DUBAI: A slowdown in Dubai’s economy since 2014 is forecast to carry on through 2022 due to low oil prices, fallout from the US-China trade war and political turmoil, Standard and Poor’s said Tuesday.
Growth in the Middle East’s most diversified economy has also been impacted by a deterioration in the key real estate and tourism sectors, the international ratings agency said in a report.
Dubai faces high public debt amounting to around $124 billion, or 108 percent of gross domestic product (GDP), divided between the government and state-linked companies, the report said.
The emirate’s GDP grew at just 1.94 percent last year, its lowest since 2010 when the city state was still recovering from the impact of the global financial crisis and defaulting on its debt.
S&P said it expected Dubai’s economy to pick up to 2.4 percent this year, largely due to the completion of projects related to the international trade exhibition Expo 2020 opening in October next year.
After the Expo, growth will then moderate to 2.0 percent through 2022, it said.
The trade war between the United States and China, and lower regional demand due to sanctions on neighbouring Iran, are likely to slow transit trade, an important contributor to the Dubai economy, S&P said.
Dubai’s GDP grew at 4.8 percent in 2013 before starting to decline and the drop accelerated last year after the property sector slumped and the number of tourists stagnated.
The city-state, one of seven sheikhdoms that make up the UAE, had expected to attract 20 million visitors annually by 2020 when it hosts the six-month Expo.
But in the past two years, the number of tourists stood at just under 16 million and in the first half of 2019, Dubai welcomed 8.3 million visitors, according to official figures.
The property market, which contributes some seven percent to GDP, has been in a downturn since mid-2014, with sale and rent prices shedding a third of their values.
Dubai ruler and UAE Prime Minister Sheikh Mohammed bin Rashed on Monday formed a committee to regulate the oversupplied real estate market.
During the past year, the emirate has taken a raft of measures to boost the domestic economy and lure foreign investors by easing residency and business rules, including allowing full ownership of businesses by foreigners outside free trade zones.
The emirate draws 70 percent of its revenues from fees on a host of transactions, some 24 percent from taxes and profits of government companies, and just six percent from oil.