Dubai Economic Outlook: Let’s keep it real, shall we?
Kipp finds government predictions of a growth rate of 4.5 percent just a tad too optimistic. Whatever happened to staying grounded post crisis?
February 15, 2012 4:22 by Eva Fernandes
Kipp spent the better half of this Wednesday at the Dubai Economic Outlook 2012 to find out the economic outlook for 2012. Would you believe us if we tell you, it is rather positive. Not really? Well, what if we told you the forum was organised by the Department of Economic Development of the Government of Dubai. It is all beginning to make sense now, isn’t it?
Sheikh Ahmed Bin Saeed Al Maktoum, Chairman of the Dubai Economic Sector Committee and President of Dubai Civil Aviation and Chairman and CEO of Emirates Group, kicked off the conference with his cheerful prediction of a growth rate for 2012 at a cheery 4 –ish percent (that is, 4.1 percent according to his speech and then 4.5 percent by other media sources).
“Dubai’s economy returned to positive growth during the last two years, albeit at a moderate pace, compared to the pre-2009 phase. According to available estimates, GDP grew by about 2.5 per cent in 2010 and by more than three per cent in 2011… As a part of our overall prudential approach in managing public finance we have rationalised the use of public funds and have set tighter budget controls for 2012 ” said Sheikh Ahmed.
Sheikh Ahmed’s optimism seemed to be shared by the Chief Economist of the Department of Economic Development, Dr.Mohammad Lahouel, who spoke of an only slightly realistic growth rate at 4.1 percent. Note also that Lahouel had mentioned 2012 will be the year of in which government spending will stabilise, if not be reduce.
Less government stimulus coupled with Lahouel’s prediction of sluggish investments—makes Kipp rather confused as to where this jaunty 4.1 percent growth rate prediction comes from (apart from optimistic thinking). “Exports of goods and services will be the main driver of growth in 2012” is what Lahouel said will contribute to this growth rate significantly, adding that Dubai has an extremely open economy with an excessively dynamic service oriented marked driven by a rather exemplary (and we’ll give him this one) tourism sector, which in turn feeds the retail and hospitality sectors.
Of course, the fact that official growth rate numbers aren’t yet released for 2011 makes predicting what the ‘growth’ will be from 2011 to 2012 a rather difficult task. These two figures are related, aren’t they? And yet, given the gloomy external factors, the Eurozone debt crisis, the slow down of the economies of both India and China and, the potentially increasing sanctions on one UAE’s major trade partners Iran, this spectacular growth rate would be impressive if really achieved.
Instead we rather much agree with the more sober predictions made by Dr. Marios Maratheftis, Head of Research, Western Hemisphere, Standard Chartered, who predicted a growth rate of 2.5 percent. Calling 2012 ‘the year of resilience’ for Dubai, Maratheftis said he doesn’t think the government of Dubai will be anywhere near ‘booming’ this year. And of course, that isn’t a bad thing at all. In fact, with the growth rate of 2011 yet to be released, just the knowledge that there will be a positive growth rate for 2012 from a particularly good 2011, is sensible and expectedly cautious good news.
Of course, we recognise that a 4.5 percent growth rate is entirely possible by shrinking and consolidation. But in all honesty, we hardly need double digit growth rates if it comes from a mad boom in a bubble market much like the construction industry in 2006. No, we will take a sustainable and stable 2.5 percent growth rate at the current circumstances any day.