Expo 2020 ‘to boost Dubai GDP by 25pc’
Kuwait, December 1, 2013
Dubai’s successful bid to host World Expo 2020 will generate about $23 billion of output (25 per cent of the emirate’s current GDP) between 2015 and 2021, a report said.
Dubai’s real non-oil growth rate is currently around 5 per cent on the back of a rapid expansion in its real estate, tourism, trade and financial sectors, added an Economic Update released by the National Bank of Kuwait (NBK).
The preparation in the run-up to the event and the event itself are expected to attract over 20 million visitors, boost foreign capital inflows, provide about 300,000 new job opportunities over the next six to seven years, and propel the pace of development projects, the report said.
The transport authority has already announced that it will increase the pace of its $1.4 billion metro extension plan, to cater for the influx of visitors.
The total value of the UAE’s proposed projects tops the rest of the GCC: it currently stands at a staggeringly high $1.38 trillion, followed by Saudi Arabia at $1.02 trillion.
A revival in construction and property projects may help alleviate Dubai’s debt burden over time, according to NBK.
As the emirate continues to restructure its debt, the win comes as a sigh of relief to debtors as they will likely take advantage of the higher capital inflows to pay off their debts. The IMF estimates that about $64 billion of debt owed by Dubai’s Government-Related Enterprises (GREs) and government will be due between 2014 and 2016. The win will likely facilitate the emirate’s efforts to repay its debt and enhance Dubai’s brand and credibility.
The government will need to ensure that the new mortgage caps are fully enforced if it is to prevent the repeat of another 2003-2008 boom bust cycle, the report highlighted.
The Expo win comes at a time when Dubai’s property sector is already witnessing an impressive rebound, so much so that the IMF urged tighter regulation in the property market back in July.
Property prices (commercial and residential) are by some measures, up almost 30 per cent year-to-date. The Expo win could result in the oversupply of residential and commercial property. The new and tighter mortgage lending rules and regulations are due to come into effect very soon. The new mortgage caps along with continued caution should help keep potential speculative bubbles at bay.
Dubai’s ambitious plans together with its relatively small population will no doubt amplify the economic effects of the event, the report said.
Looking at past events: Shanghai’s 2010 Expo event earned it an operating profit of over $164mn; Germany’s Hanover event however, led to losses of about $1.6 billion after attendance fell far short of forecasts: 18 million versus 40 million.
However, according to NBK, the latter scenario is unlikely in Dubai’s case, especially since the Expo comes to Mena for the first time.
Expectations of what Dubai will showcase are high and given its proven track record of accomplishments, it is unlikely to disappoint, though potential excesses will need to be watched, the report said. – TradeArabia News Service