Dubai’s economy grew 4.1% in real terms last year, according to the Dubai Statistics Centre. That is a good performance in the context of falling oil prices and concerns about slower global growth.
Restaurants and hotels showed the fastest growth out of all the sectors last year, expanding 8%, and underlining the importance of tourism for Dubai’s economy. Hotels have reduced rates to attract visitors over the last year and a half, as the strengthening US dollar has made the UAE more expensive for visitors from emerging markets such as China, India and Russia. This strategy has been successful, with most hotels enjoying over 80% occupancy so far this year.
Nearly 21 million passengers passed through Dubai International Airport in the first quarter of this year, almost 7% more than in first quarter 2015. The new Dubai World Central airport has also seen massive growth in passenger traffic, with more than 257,000 passengers passing through in the first three months of this year – an increase of nearly 80% on 2015. The addition of new airline routes and increased capacity on existing routes has helped to drive the growth of the transport sector in Dubai, which expanded 5.0% last year.
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Tourism and transport are among the sectors that will drive Dubai’s economic growth over the next few years, even as the rest of the GCC economies are adjusting to lower oil prices and government spending cuts. The Department of Tourism and Commerce Marketing aims to double the number of visitors to Dubai by 2020 (compared to 2012). In order to achieve this goal, substantial new capacity will have to be added to infrastructure, including roads, airports, hotel rooms and airline capacity. Leisure attractions including the new theme parks and shopping malls will also help to draw tourists from around the world.
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Importantly, the hospitality and tourism sector is one of the most labor intensive. By investing in this sector, and growing it significantly over the next few years, Dubai will also create employment opportunities for the wider region where youth unemployment is one of the biggest concerns.
While most experts agree that economic growth in the GCC will probably slow this year, the statistics suggest that Dubai is well placed to weather the downturn, as its economy is well diversified and not as vulnerable to changes in the oil price. Continued investment in infrastructure ahead of Expo2020, particularly transport and tourism infrastructure, should drive growth in the emirate over the next four years.