- Expo 2020 expected to boost GDP
- Relaxation of residency rules helps real estate
LONDON: Is the Dubai economy finally turning the corner? At least one major international bank thinks so.
It follows a move by the emirate's leadership to reboot an economy that has been hit hard by corporate job losses, the introduction of VAT and a slowing real estate sector.
The UAE’s non-oil economy is likely to “turn a corner” next year with Dubai’s Expo 2020 infrastructure projects, changes to visa rules and increased government spending set to boost growth, according to a Bank of America Merrill Lynch (BofAML) research note.
Abu Dhabi National Oil Company’s (ADNOC) downstream expansion plans are also expected to drive the country’s non-oil GDP growth, said the note compiled by Middle East and North Africa (MENA) economist Jean Michel Saliba.
The Gulf country’s real GDP growth is estimated to rise to 3.5 percent in 2019 from a forecast 2.8 percent increase this year and a 1.9 percent increase in 2017, said the note published on Thursday.
Buoyed by a recovery in oil prices, Abu Dhabi approved a 50 billion dirham ($13.6 billion) three-year stimulus package in early June, which BofAML estimated could add 0.4 percentage points to non-oil GDP growth.
ADNOC’s $45 billion five-year downstream investment plan — revealed in May — is estimated to add a further 1.1 percentage point to the emirate’s non-oil growth, the report said.
The Expo 2020 event in Dubai could drive up GDP growth by 2 percentage points between 2020 and 2021, the report said, by boosting job creation, consumption and tourist numbers.
Given the improvement in oil prices, the cost of Abu Dhabi’s stimulus spending is considered “financeable” by BofAML, while Dubai’s spending plans are said to be “modest.”
Recent structural reforms, including plans to introduce long-term expatriate visas for up to 10 years, could help to boost the UAE’s population and consumer demand, the note said.
“The new UAE long-term and temporary visa system should facilitate retention of white-collar expatriates,” it said.
“As we expect longer-term visas not to be linked to continued employment, this may increase expatriate incentives to acquire property and support real estate demand.”
The UAE announced in May that it would allow 100 percent foreign ownership of UAE companies in specific industries by the end of the year, a move that could give a welcome boost to foreign direct investment in the country.
A new UAE-wide insurance scheme may provide a one-time boost to corporate profits, the note said.
The UAE cabinet approved plans in June for the insurance scheme to replace the previous system whereby employers had to provide a monetary guarantee to cover each of their workforce.
The move is likely to free up capital that companies could choose to sit on or to reinvest, BofAML said.
“Should corporates invest, we estimate this could lead to a one-off 0.1percentage point boost to UAE non-hydrocarbon real GDP growth,” the report said.