Dubai’s economy has made a remarkable recovery and is close to its pre-pandemic size, driven by various strategic sectors. Fitch Ratings has reported that the emirate has regained approximately 98.0% of its pre-Covid-19 economic level. However, Fitch anticipates a slight deceleration in Dubai’s real GDP growth, projecting a decrease from an estimated 4.2% in 2022 to 3.4% in 2023 due to lower oil prices and increased borrowing costs.
Despite anticipating a slowdown, experts expect the growth to surpass the average growth rate of 3.1% recorded from 2015 to 2019.
“We believe that the ongoing rebound in the emirate’s key sectors, which have yet to fully recover from the pandemic, will keep growth above the historical trend in 2023. We expect activity in the wholesale and retail sector (which account for 26 per cent of total GDP) will pick up helped by a growing population and the sustained influx of tourists, especially those with elevated purchasing power,” the global ratings agency said.
Anticipated Slowdown in Dubai’s Real GDP Growth
Experts primarily attribute the anticipated slowdown in Dubai’s growth compared to the previous year to the diminishing base effects. Fitch Ratings’ tourism team predicts that tourism arrivals in the UAE will experience a modest 10% growth in 2023, following a remarkable 55% surge in 2022. This slower growth will likely impact sectors like accommodation and food services.
Despite the slowdown, Dubai’s tourism sector maintained its strong performance in April, attracting 6.02 million visitors during the first four months of 2023, an 18% increase compared to the same period last year. Dubai’s tourism sector remains just four per cent below pre-pandemic levels.
During Ramadan, the sector set a new record with 1.35 million visitors, marking a 19% increase from the previous year and a substantial 50% jump from pre-pandemic levels in 2019, according to Emirates NBD Research calculations.
Sector Contributions to Dubai’s GDP in 2023
In 2023, Fitch expects wholesale and retail, transportation and storage, financial and insurance, manufacturing, real estate, construction, accommodation and food, and information and communication sectors to be major contributors to Dubai’s GDP.
“We also anticipate growth in the transportation and storage sector will remain robust, benefiting from the normalization of global trade, the recovery of Mainland China (the emirate’s main trading partner), resilient demand in neighboring GCC countries and the authorities increased efforts to boost foreign trade. The real estate sector will continue to be a key contributor to headline growth in 2023, amid higher demand for properties in light of growing population and residency schemes,” Fitch analysts said.
The financial sector in Dubai is expected to continue its growth trajectory, driven by factors such as the listing of companies on the Dubai Financial Market and the continued momentum in the local private equity market.
