Dubai’s economy expanded by 4.1 per cent year on year in real terms in the first half of 2012 as manufacturing and tourism-related industries offset the emirate’s struggling construction sector.

Manufacturing, which represents 14 per cent of Dubai’s economy, grew by more than 10 per cent in the first six months of the year, while restaurants and hotels, accounting for 4 per cent, expanded 16.1 per cent, according to Dubai Statistics.

Although wholesale and retail – the largest section of Dubai’s economy – grew by 3.8 per cent, the construction sector contracted by 2.5 per cent year on year.

Tim Fox, chief economist at Dubai-based bank Emirates NBD, said the construction sector is expected to have bottomed out in the second half of 2012.

“While the first half gross domestic product (GDP) estimates are encouraging and well above our annual forecast of 2.5 per cent growth in Dubai this year, we expect growth to have slowed in the third quarter of the year on the back of weaker global economic conditions,” said Fox in a research note. “We thus maintain our annual growth forecast for the time being, but we recognise that the risks are on the upside.”

The first half data also showed a 1.5 per cent increase in real estate and business services – the first positive movement since 2008 – and a 4.8 per cent rise in transport, storage and communications.