After a significant recovery over the previous two and a half years, fueled by the important strategic industries, Dubai has almost reached its pre-pandemic size.
According to Fitch Solutions, a provider of insights, data, and analytics, the emirate’s economy has recovered about 98% of its pre-Covid-19 size.
However, it anticipates that due to lower oil prices and a higher cost of borrowing, Dubai’s real GDP growth will slow from a projected 4.2% in 2022 to 3.4% in 2023.
Despite the decline this year, it was stated that the increase will still be higher than the 3.1% average for 2015–19.
“We anticipate that the emirate’s core industries, which are still recovering from the epidemic, will continue to rise above the historical average in 2023. We anticipate that activity in the wholesale and retail sector, which makes up 26% of the overall GDP, will increase due to population growth and the ongoing influx of tourists, particularly wealthy ones, the report added.
The emirate’s growth compared to the rate in 2022 has slowed considerably, partly due to diminishing base effects.
For instance, the tourism team at Fitch predicted that after rising by 55% in 2022, tourism arrivals to the UAE would only increase by 10% in 2023, which will result in slower growth in industries like lodging and food services.
As the city welcomed 6.02 million tourists in the first four months of 2023, up 18% from the previous year but 4% below pre-pandemic levels, Dubai’s tourism industry continued to operate well in April. According to projections by Emirates NBD Research, the industry broke its previous record for the number of visits during Ramadan with 1.35 million, a 19% increase from the previous year and a 50% increase over pre-pandemic levels in 2019.
According to a Fitch forecast for 2023, the emirate’s GDP will be primarily driven by wholesale and retail, transportation and storage, finance and insurance, manufacturing, real estate, construction, lodging and food, and information and communication.
According to the forecast, the recovery of Mainland China, the emirate’s main trading partner, resilient demand in neighbouring GCC countries, and the government’s increased efforts to promote foreign trade will all contribute to the transportation and storage sector’s robust growth. Due to increased demand for homes due to population expansion and residency programs, the real estate industry will continue to play a significant role in driving headline growth in 2023, according to Fitch analysts.
Additionally, it was projected that the financial industry would continue to expand due to company listings on the Dubai Financial Market and the local private equity market’s ongoing strength.