Dubai GDP grew 2.8% in 2017

Dubai’s real GDP expanded 2.8% last year to reach AED 389.4bn, in line with our forecast of AED 389.9bn.  However, the growth rate was lower than the 3.5% we had pencilled in, because 2016 GDP growth was revised up sharply from 2.9% to 3.4%.  Manufacturing, utilities, transport & storage, financial services and real estate services were all revised higher in 2016, while wholesale & retail trade sector, hotels & restaurants and construction were revised down.

Dubai: GDP growth slowed in 2017

Source: Dubai Statistics Centre (DSC), Emirates NBD Research

The biggest contributor to Dubai’s growth last year came from the transport & storage sector, which grew 4.5% y/y and accounts for nearly 12% of Dubai’s GDP, followed by real estate services which grew 7.3% y/y and account for 7% of Dubai’s economy.  This is separate from construction, which grew 3.5% y/y in 2017, the fastest rate of growth since the financial crisis.  Hotels & restaurants (5% of the economy) grew 8.0% y/y.    

Sluggish retail trade sector weighs on growth

The largest sector of Dubai’s economy is wholesale & retail trade, which accounts for about 27% of Dubai’s real GDP.  This sector grew just 0.9% last year, only marginally better than the 0.5% growth in 2016.  Growth in wholesale & retail trade over the last two years has been much slower than previous years – the average growth rate for the sector was 4.7% between 2010 and 2015. 

The softness in the trade sector has been partially offset by faster growth in smaller sectors such as health & social work (13.7% y/y) and arts, entertainment & recreation (9.0% y/y). 

2018 growth forecast under review

With the economy having grown 2.8% last year, and the softer PMI surveys in the first quarter of 2018, our 4.1% 2018 GDP growth forecast for Dubai now looks too high.  However, we are waiting for full UAE GDP statistics for 2017 before revising our growth forecast.