Dubai will be among the worlds fastest-growing economies in the years leading up to the World Expo 2020, experts this week told a gathering of senior business leaders in Dubai.
Delegates at MEEDs Destination Dubai 2020 conference held at the Shangri La Hotel Dubai on the 28-29 January, heard that soaring business confidence would combine with a strong recovery in infrastructure spending and real estate investment to drive real growth of nearly 10 per cent a year in the emirates GDP in 2019 and 2020.
Chief Economist at investment bank EFG-Hermes Monica Malik said that Dubais real growth should be at least 5 per cent a year in 2015 and that winning the mandate to host World Expo 2020 will lift the rate of expansion by at least two percentage points above what it might otherwise have been. This means the emirates GDP, estimated at about $140bn in 2013, could double in 2020.
Dubais permanent resident population is forecast to increase by at least 50 per cent on a new surge of migration, fuelling demand for housing, retail and hospitality services. Dubais tourism plan calls for the number of visitors to rise from 10m in 2012 to 20m. Hotel industry analysts forecast that the number of hotel rooms will need to double by 2020. The World Expo itself is forecast to attract 25m visitors, 70 per cent of them coming from overseas. Investment in World Expo 2020 facilities is budgeted to be about $7bn.
Dubai, nevertheless, remains one of the worlds most indebted places. Private and public sector debts are estimated at 100 per cent of GDP, but amounts owed by the government account for only about 30 per cent of the total. The bulk is accounted for by government-related entities (GREs) including Nakheel and Dubai Holding, but restructuring agreements have successfully extended the maturity of some GRE debts. Bankers told Destination Dubai that the debt service burden has become increasingly sustainable and that economic growth coupled with action to increase government and GRE income should create capacity for further borrowing to support investment in infrastructure and real estate.
Destination Dubai heard that Nakheel, which was at the centre of the Dubai debt panic of November 2009, aims to pay off its debts in 2016. It has launched four new projects and the company is encouraging investors to resume work on their developments in the Dubai Waterfront, the largest of all Dubais integrated real estate development plans. There is as yet no sign of what Nakheel plans to do with Palm Jebel Ali, the second of Dubais offshore islands which remains entirely undeveloped.
The Dubai International Financial Centre (DIFC), which celebrates its 10th anniversary this year, has finalised a revised masterplan which calls for the completion of the DIFCs built-up area. EMAAR properties told the conference its launching a project a week. The Dubai Multi Commodities Centre (DMCC) says work on the Bourj 2020 tower, which will be the tallest commercial building on earth, will start in 2015.
Public investment will also accelerate the conference is told. The Roads & Transport Authority (RTA) unveiled plans to extend the Red Line and Green Line in the Dubai Metro. Dubai Municipality reported plans to develop a dozen leisure projects designed to attract visitors.
The conference was also told that a breakthrough in negotiations between Iran and the west about Tehrans nuclear plans would constitute a huge further opportunity for Dubai and the UAE. About 350,000 people of Iranian descent and heritage live in Dubai. The resumption in trade links with Iran, disrupted by international sanctions again Tehran, could see that number double in less than a decade.
MEED Insight head Ed James said the sharp increase in activity in Dubai will lead to a sharp rise in demand for projects and he forecast that the value of new contract awards in 2015-20 will rise to $30bn annually even on modest forecasts of future economic activity in Dubai. That will restore the projects market to its level before the 2008/09 financial crisis.
The conference expressed concerns about two issues. The first was the possibility of the return of high and unpredictable inflation. Malik said the general cost of living could average at least 5 per cent a year in 2015-20. The cost of education and housing could rise by at least 10 per cent annually in this period.
The second concern was the lack of affordable elementary and secondary schools. The conference was told that the increase in population will lead to 110,000 additional school students in 2020. This will require up to 200 new schools, but the government has no plans to build any. All school investment is expected to come from private investors. The lack of affordable housing for low-income migrant workers is also an issue, delegates said.