Dubai Q3 2017 GDP: Construction sector rebounds

Dubai’s GDP growth accelerated to 3.2% y/y in Q3 2017 from 2.3% in Q2 and 3.1% in Q3 2016, according to official data.  The highlight in our view was a sharp recovery in construction sector growth, which accelerated to 7.7% y/y in Q2 and 7.5% y/y in Q3 2017, the fastest growth rates since the financial crisis.  The Emirates NBD Dubai Economy Tracker had indicated a rebound in construction sector activity last year, and this now appears to be confirmed by the official GDP statistics.

Dubai: Real GDP growth and the Emirates NBD Dubai Economy Tracker Index

Source: Haver Analytics, IHS Markit, Emirates NBD Research

The fastest growing sectors in the third quarter of 2017 were among the smallest in terms of GDP:  water, sewerage & waste management (26.5% y/y; 0.1% of GDP) and health and social work (17.4% y/y; 1.1% of GDP).  

Of the bigger sectors, real estate activities grew 7.9% y/y and the transport & storage sector grew 4.2% y/y in Q3 2017.  Wholesale & retail trade expanded 3.9% y/y after contracting in Q2.  However, manufacturing, which accounts for nearly 10% of Dubai’s GDP, recorded just 0.1% growth over Q3 2016.  Hotels & restaurants grew 1.6% y/y but this was off a very high base (26.3% y/y in Q3 2016).

The only sectors which contracted in the third quarter of 2017 were information & communication (-2.3% y/y) and finance & insurance activities (-0.8% y/y).

Overall, Dubai’s economy expanded 2.9% y/y in January through September.  While this makes our full year forecast of 3.5% look a little out of reach, we believe that growth accelerated sharply in Q4 2017 as businesses and consumers brought forward purchases and boosted output ahead of the introduction of VAT in January 2018.  We expect Dubai’s growth to accelerate to 4.0% this year.  

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