Dubai has been one of the fastest growing economies in the past 3 decades, if not the fastest. Dubai has been all over the news and social media for quite some time now, and everyone is amused by its dramatic changes. It distinguishes itself with its ultramodern architecture, skyscrapers, and luxurious shopping. It’s also known for its indoor skiing, housing the tallest skyscraper in the world, “Burj Khaleefa”, and building man-made islands such as the “Palm Jumeirah”.
Dubai is the second wealthiest emirate in the United Arab Emirates (UAE) after Abu Dhabi, which is the capital state. Although Abu Dhabi is the wealthier emirate, Dubai is expected to see higher growth due to it’s diversified economy. The International Monetary Fund’s (IMF) Middle East and Central Asia Department Director, Masood Ahmed, projected Abu Dhabi’s growth at 1.7% for 2016, much lower than 4.4% growth recorded in 2015. Meanwhile, Dubai’s economy is expected to grow 3.7% in 2016, just above last year’s recorded growth of 3.6%.
Most people believe that Dubai’s main revenue stream comes from oil-based products, just as the rest of the Arabian Gulf region, but in reality, about 95% of Dubai’s GDP is not oil-based. This helps explain the wide difference in growth between Dubai and the rest of the region. Even though Dubai’s economy was built on the back of the oil industry, the government has spent the oil money wisely, diversifying its economy and opening the Dubai International Financial Centre (DIFC) in 2004. THE DIFC opened the country's doors to many international companies, allowing them to operate and make Dubai a major business hub. Dubai also serves as the biggest re-exporting center in the Middle East, further explaining the positive growth. Dubai’s main source of income comes from government fees, tax revenues (excluding income tax), and tourism. In addition to all of this, Dubai won the bid and will be hosting the Expo 2020, which will boost the economy even further and create over 270,000 jobs between 2018 and 2021.
The extremely low oil prices have hit the growth rates in the region hard because a substantial percentage of the countries' GDP was based on oil-based products. The IMF said that the Arabian Gulf will lose around $140 billion in export revenue this year, mostly due to these low oil prices. Dubai’s growth far exceeds the average growth in the Arabian Gulf, which is forecast at 1.8% for 2016, almost 2 points lower than Dubai. Saudi Arabia, home to the region’s largest economy, is forecast to only grow around 2%.
The UAE was ranked among the top 15 EMEA countries for investment hotspots, which should be good news for businesses. The UAE also has a favorable long-term growth of 3.5% annually over the next decade, mostly based on Dubai’s strong diversified economy and the assumption that oil prices will keep gradually rising.