Dubai’s economy is expected to grow 2.4 per cent in 2019, higher than last year on the back of increased economic activity associated with Expo 2020, according to S&P Global Ratings.
“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 ratings agency said on Tuesday. "A boost to tourism and related spending linked to Expo 2020 should drive somewhat stronger growth in 2020,” the report said.
Dubai's economy grew just under 2 per cent in 2018, the slowest expansion since 2010 due to low oil prices and a slowdown in the property sector. Dubai has been spending heavily to boost infrastructure as part of preparations for the Expo. The emirate's Roads and Transport Authority opened a Dh1.3 billion network of roads leading to the Expo 2020 exhibition site.
The report also said Dubai's economy will expand at an average of 2.5 per cent annually over 2019 to 2022 period with trade and transportation supporting the growth apart from Expo activity. Though downside risks to growth have risen from trade and real estate sector, which could see property prices fall 5 per cent to 10 per cent in 2019, new economic stimulus plans to promote small and midsize enterprises and public-private partnerships, announced recently by the government, could gradually increase Dubai's long-term growth potential, the agency said.
“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,” it said.
The report also notes UAE banks will be more resilient than in the last real estate cycle in 2002-2008, due to stronger regulation and more conservative lending to real estate developers and mortgagors.
“Regulations created in 2013, which cap the loan-to-value ratio, are positive for the stability of the banking sector.”
The UAE's economy will accelerate to 2.6 per cent by 2020 from 1.7 per cent in 2018 in part due to increased economic activity associated with the Expo, S&P said.
Dubai contributes a significant amount to the non-hydrocarbon sector of the UAE representing about 70 per cent of UAE’s real GDP.