Dubai growth rises to 4.2% as bank lending increases and construction gathers pace

Dubai’s economy is picking up pace as banks boost lending and cranes sprout around the city.

The economy grew at an annualised rate of 4.2 per cent in the first three months of the year, up from 4.1 per cent in the first quarter of last year, according to new data from the Dubai Statistics Centre.

“Over the past 18 months, Dubai’s economy has really gathered pace. This has been driven by improvements in real estate, while tourist demand has picked up as well,” said Jason Tuvey, an emerging markets economist at Capital Economics. “We’ve also seen banks starting to lend again.”

Signs of a new housing boom increased business for property development companies and construction firms, the data show.

Logistics and manufacturing both registered growth rates above 5 per cent as the city’s network of free zones attracted more business.

The retail sector, which accounts for more than a quarter of all economic activity in the city, grew at 4.1 per cent as Dubai attracted a record number of tourists in the first half of the year.

Growth in the retail sector is being driven by increases in disposable income and rising consumer confidence, Mr Tuvey said.

The forthcoming IPO of Emaar’s malls business is another indication of the buoyancy of the retail sector. The issue is expected to be oversubscribed, as foreign investors seek exposure to the economy’s largest sector.

But inflation is also accelerating in the emirate as price rises accompany growth, in an indication that the amount of spare capacity in the economy is decreasing.

Dubai’s inflation edged up to a five-year high of 3.5 per cent year-on-year last month from 3.4 per cent in the previous month.

The biggest increase was in housing and utility costs, which jumped 6.2 per cent year-on-year and 0.4 per cent month-on-month in August.

The IMF predicts that the UAE economy will expand by 4.8 per cent this year. Dubai’s economy grew 4.6 per cent last year.

The emirate’s emphasis on fostering trade is likely to bring it new business in the future, said Mr Tuvey.

“Dubai’s relatively lesser reliance on hydrocarbons and openness means that it can benefit from the global recovery,” he said.

Dubai’s debt position is also improving as asset prices recover. Nakheel, the palm islands developer hit heavily by the 2008 crash, cleared its bank debt ahead of schedule last month.

abouyamourn@thenational.ae

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