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UAE CONTINUES TO SHOW ECONOMIC GROWTH ON 43RD NATIONAL DAY

Today, on UAE’s 43rd National Day, Research Konnection have compiled a report to understand how UAE’s economy has grown in last twelve months and have evolved from a pearl trading state to petroleum heavy weight and subsequently into a diversified economic power with regional and global significance.

Economic Resilience & Non-Oil GDP  

After the global economic downturn, UAE has come a long way to register a robust economic outlook. Growth of UAE has been resilient in the last 12 months, even though there has been a dip in the oil prices. UAE is expected to register a 5% GDP growth in 2014-15 respectively. The high growth is expected to be driven by growth in non-oil GDP of UAE, which is growing at the rate of 5-6% annually.

Key Performance Sectors

Real Estate and Infrastructure

Real estate is one of the principle components in UAE’s diversified economy, with Dubai leading the pack, on the backdrop of economic growth and World Expo 2020. The second largest Emirate has seen a massive surge in international and regional investor’s interest in its real estate market, with a total investment of AED 37.5 billion in the first half of 2014.

Although compared to last year, the price rise has subsidized in the recent past, but the slowdown in rise should be seen as a correction in market rather than any long term slow down symptom. Similar to Dubai, Abu Dhabi and other Northern states have also made significant progress in the real estate sector, with the latter also benefitting from the high rental prices of Dubai, which stimulates many residents to move into Sharjah and Ajman. In one of the interesting moves, Sharjah has recently announced to offer properties on 100 years freehold to foreign national in AED 2 billion mixed use property called as Tital Property.

Similarly, the previous 12 months have seen some significant progress in terms of major infrastructure projects in UAE. Operations have commenced in the Dubai World Central (DWC) airport. Once completed, it will be the largest airport in the globe with a capacity of 220 million. Work has commenced on the AED 2 billion, Dubai Canal Project, which is a 3 KM long project starting from Business Bay and go till Arabian Gulf and involve luxury housing, restaurants and walkways etc., thereby boosting real estate as well as tourism in the city. Dubai tram has also started its operation Konnecting Dubai Marina with Mall of Emirates and Burj Al Arab . Massive work is continuing on the Sadiyat Island project in Abu Dhabi, which once completed will be an epicenter of art, culture and real estate in the region.

Tourism/Aviation Sector

UAE’s tourism sector has been continuously doing strong and similar sentiments have persisted in 2014 as well with increase in occupancy and Revenue per Available Room (RevPAR). Dubai with an existing supply of 84,000 rooms is expected to add another 30,000 to 60,000 rooms in the next 5 to 7 years as a part of World Expo 2020 and long-term strategic plan. The new supply of room will be added to effectively absorb the Emirate’s objective of adding nearly 9 million new annual tourists by 2020.

Similarly, Abu Dhabi is also making massive investments in further developing the percentage share of its tourism and hospitality industry in the overall GDP. Given the position, the tourism and hospitality industry of UAE is at the moment, it is another key area which can ensure high Return on Investment (ROI). However, in some quarters there has been concern pertaining to the rise in land price and construction costs in UAE, as it can put downward pressure on the anticipated ROI.

Aviation companies in UAE have also undertaken rapid progress in the recent past. In the financial year 2013-14, Dubai’s flagship carrier Emirates Airlines made a profit of AED 3.3 billion, a 43% jump compared to 2012-13. Abu Dhabi’s flagship carrier, Etihad Airways registered a net profit of AED 228 million, a jump of 48% from the year before. Sharjah’s flagship carrier Air Arabia, which is also the first ever Low Cost Carrier (LCC) of GCC region, demonstrated a profit of AED 435 million, a 2% increase on the year before. Air Arabia’s key competitor Fly Dubai, the Emirates backed LCC registered a profit of AED 223 million, a 47% jump from the year before.

Retail Industry

On the backdrop of rise in tourism and local population, the burgeoning retail industry has also seen further growth with work going on a range of new shopping malls such as Dubai Pearl Mall, Nakheel Mall and Jumeirah Village Triangle Mall. Similarly, many of the exiting malls such as Dubai Mall and Dragon Mart are undergoing expansion. Along with Dubai, Abu Dhabi and Northern Emirate are also catching up with the mall culture. Abu Dhabi has opened Yas Mall in November, which is the largest retail and entertainment destination of the capital and is spread in a 2.5 million sq. ft., involving 373 retail stores and 60 restaurants. The largest Emirate is working on a range of other mall projects which are being developed in tandem with its rising tourism industry.

Manufacturing, Services & Education

Other sectors such as manufacturing, service and education are also catching up fast in UAE. Recently BRF has opened a USD 160 million plant in Abu Dhabi with a capacity of 70,000 annual tons. In order to bolster its long term ambitions, Emirates in UAE are also significantly spending public services such as K-12 and higher education, security services and healthcare. In terms recent time has seen a massive surge in online and other technology enabled solutions in the education arena.

Dubai Expo 2020 & Abu Dhabi Economic Vision Plan 2030

On 26th of last month, Dubai will celebrate the completion of 12 months of the winning the bid to host the World Expo 2020. In the last 12 months, the Expo has seen the validation of the Dubai registration dossier process, formation of the team to overview the development work in the next six years and ideation of the overall roadmap of the event comprising of master planning, construction program delivery, sustainability, commercial planning, marketing and communication and commercial sponsorships etc. The Expo team has also visited Milan, where the next Expo will take place in 2015, to learn and examine how the overall event will be executed. In another significant development, the next phase of master planning of Dubai Expo site, which is spread over 47 million sq. ft. has commenced.

Similarly, work is in progress in the Abu Dhabi 2030 strategic vision plan, which aims to diversify the economy in multiple key sectors, encompassing of real estate, tourism, logistics retail, manufacturing and education etc. which has been briefly discussed above.

The Way Ahead   

In a nutshell it could be described that notwithstanding the recent slashing of oil prices, the overall economic outlook of UAE looks robust, with various sectors such as real estate, tourism, retail, education etc. performing well at the moment and offering great avenues of investment to local as well as international investors. The success could be largely attributed to the vision of the leadership and dedication and hard work of its citizens and residents. On the occasion of the 43rd national day, Research Konnection Team wishes everyone a happy National Day and hope that the toils and efforts towards excellence continue from every quarter.

Author: RKonnect
The author is the Managing Director of Research Konnection, a Dubai based market research and consulting firm that helps local and international companies to identify emerging business opportunities and successfully expand in the Gulf region. The author can be reached at waqas@researchkonnection.com
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