Dubai GDP contracted 10.9 percent in 2020

Khatija Haque - Head of Research & Chief Economist
Published Date: 11 October 2021

 

Dubai’s economy contracted by -10.9% y/y in 2020, more than the -8.0% we had estimated, according to the latest data from the Dubai Statistics Centre. Unsurprisingly transport & storage and hotels & restaurants were among the worst affected sectors, contracting by -35.7% and -33.1% respectively.  Wholesale & retail trade GDP declined -12.0% in 2020 and construction contracted -2.6%.  Most services sectors contracted last year due to the lockdown and restrictions on activity. 

However, it was not all bad news.  Financial services grew 3.4% last year (the fastest sector growth since 2015), manufacturing output grew 0.6% and public administration, defence & social security GDP grew 1.6%.  The education sector also grew 0.8% last year as schools invested in technology and training to facilitate the shift to online learning.

Dubai GDP: Key sector growth rates

Source: Dubai Statistics Centre, Haver Analytics, Emirates NBD Research

Data for Q1 2021 shows Dubai’s economy grew 11% q/q but declined on an annual basis by -3.7% y/y.  Once again, lower output in transport & storage and hotels & restaurants in the first quarter of this year (relative to Q1 2020) weighed on headline GDP growth.  However, the largest sector of the economy, wholesale & retail trade, grew 2.8% y/y in Q1 21, while financial services (the second largest sector) grew 3.5% y/y. The manufacturing sector grew 3.2% y/y in Q1 21, and real estate services expanded 2.4% y/y even as construction output contracted on an annual basis.

Dubai: Quarterly GDP growth 

Source: Dubai Statistics Centre, Haver Analytics, Emirates NBD Research

We expect a rebound in annual GDP growth from Q2 2021 off last year’s low annual base, but global restrictions on travel likely weighed on Dubai’s recovery in both Q2 and to a lesser extent in Q3.  This has been evident in the PMI surveys, which indicated only a modest improvement in business conditions over the last two quarters. These travel restrictions have eased in recent weeks and we expect growth to accelerate in Q4.  Overall, we expect Dubai’s economy to grow 4.0% in 2021 as it recovers from last year’s sharp contraction. We forecast whole UAE GDP growth of 1.9% this year from -6.1% previously.