Dubai GDP grew 6.3% through September 2021

Dubai’s economy grew 6.3% y/y in the first nine months of 2021, underpinned by a strong rebound in hospitality, trade and real estate sectors.  While growth is likely to slow somewhat in 2022, Dubai’s economy will continue to recover from the pandemic-related contraction in 2020.

Preliminary data from the Dubai Statistics Centre show real GDP increased 17.8% y/y in Q2 off the low 2020 base, before moderating to 6.3% y/y in Q3 21.  Real GDP contracted -10.9% over the course of 2020, so while the economy has made good progress with the recovery, it was not back to pre-pandemic levels of real output by the end of Q3 2021.   

Dubai quarterly real GDP 

Source: Haver Analytics, Emirates NBD Research

Real value added by hotels & restaurants more than doubled in Q2 2021, after contracting by -60% the previous year due to peak Covid-related lockdown measures in Q2 2020.  Over Jan-Sep 2021, the sector grew 34% y/y, as travel and capacity restrictions in the sector were eased.

Real estate services also saw strong growth of 23.3% y/y in the year to September 2021, more than making up for the contraction in the sector in 2020.  Strong demand for residential real estate saw the number of transactions grow 75% y/y over the period.  Low interest rates, demand for larger units and increased foreign demand for homes in Dubai supported the recovery in the real estate market last year. 

The wholesale & retail trade sector also benefitted from the normalization of economic activity and the recovery in consumer demand last year. The trade sector’s value added grew 7.6% y/y in the year to September 2021 but has not fully made up the ground lost in 2020 due to the impact of the pandemic. 

Transport & storage, manufacturing, financial services and the arts & entertainments sectors all posted positive GDP growth last year, as did professional and administrative services.

Several sectors contracted in the first nine months of 2021 relative to the same period in 2020. Oil and gas GDP declined more than -8% y/y, information & communication contracted -1.9% y/y and the government services sector declined -2.4%. Construction GDP contracted -0.7% y/y after declining -1.5% y/y in Jan-Sep 2020.   

We had pencilled in growth of 4.0% for Dubai in 2021 but the data through September, and expected growth in Q4 2021, suggest that there is significant upside risk to this forecast.  We now estimate Dubai’s economy grew around 5.5% for the full year 2021.  With headwinds to growth in 2022 including slower global growth, higher interest rates and a stronger USD, we expect growth to slow in 2022 to 4.0%-4.5%.