Dubai scales down growth and records its first budget deficit
As you are no doubt aware, the global recession is hitting Dubai hard. Even the relentlessly optimistic and upbeat Dubai Government is being forced to acknowledge this as it revises it growth forecasts till 2015 downwards from 11 percent per year to 4-6 percent per year in view of the global economic crisis.
When the targets were set in early 2007, 11 percent seemed realistic given that the emirate had experienced an average growth of 13 percent per annum over the preceding six years. But with the real estate and construction industries, which were largely responsible for this impressive growth, struggling in the current climate, and fears for the tourism and financial industries, the government has downscaled their forecasts.
Nasser Bin Hassan Al Shaikh, director-general of Dubai Department of Finance, told the media: “That type of growth will be difficult to achieve under the current circumstances. We have to be realistic. We are assessing the situation and will be able to finalise in two to three months.”
This coincides with a sharp fall in the price of oil over the last few months, which while only four percent of Dubai’s GDP, is still an important source of income.
The government is seeking to kick-start the economy by injecting 37.7 billion dirhams (10.3 billion dollars) of central funds into major infrastructure works such as the Dubai metro and new airport, resulting in a projected 4.2 billion dirham ($1.44 billion) deficit.
Al Shaikh was robust in his defence of the steps taken by the government to shore up Dubai’s economy, “the deficit we have is one of the lowest in the Gulf region. The significantly higher budget expenditure and willingness to go for a deficit budget reflects the government’s commitment to keep up with its spending on key sectors,” he said. He added that the deficit will represent no more than 1.3 percent of Dubai’s GDP and that the budget should balance within three years.
Only time will tell.
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- Dubai’s budget deficit may be lower than expected
- First records of Dubai
- Dubai aiming to spend its way out of recession
- Dubai government moves to stabilise economy
- Work stops on Nakheel Harbour and Tower for a year
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