UAE Dubai Economy

tony nguyen

Optimism in the UAE economy has surged in recent months as it is now seen as a beacon of stability amongst the middle east unrest. This coupled with the governments hydrocarbon revenues being boosts by nearly 40% as oil prices have risen on the global markets. The UAE is benefitting “from a broadly favourable global environment” states the International Monetary Fund (IMF) and confirms its belief that the UAE is broadly immune from contagion of the political crisis engulfing its GCC neighbours.

Non-hydrocarbon sectors of the economy also showed robust growth as they posted a 2.1% increase in activity last year compared with 0.6% in 2009. 2011 is predicted to show an increase of 3.3% putting some “developed” economies in the shade. Again the IMF acknowledged that the UAE is well place to benefit from the recent turmoil as businesses and tourism in the region may relocate to the UAE’s favourable and well developed business environment. It seems that fears of a double-dip recession in the UAE are receding and the future is looking somewhat brighter than before.

There are, however, still risks to the group of emirates. There is still a 30% void rate in property in Dubai, which has seen dramatic falls in property prices since the boom-days, and there is still more capacity coming onto the market. There is also the debt issues relating to some Dubai government owned businesses such as Dubai-World which has reached an agreement with its creditors but needless to say that some investors have been burned.

This doesn’t seem to have dulled the interest of some however, as property transactions on the Palm Jumeirah has increased 87% in the first half of 2011. This is largely seen as the result of middle-eastern investors flocking to Dubai looking for stability. Lease rates on the Palm have also increased 4% and high-end apartment rents are up 5%. This contrasts with the purchase prices being down 3% from the previous quarter but the increase in activity has led some sellers to raise asking prices as they try to feel for the bottom of the market.

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UAE Dubai Economy

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