Dubai, which is the most prosperous city in the United Arab Emirates (UAE), is set to hold the next World Expo in 2020. New figures suggest that the World Expo 2020 will help Dubai offset the effects of falling worldwide oil prices, in order to record significant economic growth.
Weathering oil prices
Traditionally, the UAE is an oil-based economy. For instance, oil represented 79% of Emirati Gross Domestic Product (GDP – the broadest measure of economic growth) in 1980. However, global oil prices have fallen significantly over the past two years. The National reports that in light of this development, the UAE has unveiled plans to move away from an oil-based economy.
Yet oil still represented 30% of Emirati GDP in 2014, so falling international oil prices have had a significant impact on the Middle Eastern country. It has limited the government’s ability to initiate major spending programmes. The richest of the UAE’s Emirates, Abu Dhabi, has responded to falling global oil prices by cutting government spending. Consequently, the International Monetary Fund (IMF) predicts that Abu Dhabi’s economic growth will drop from 4.3% in 2015 to 1.5% in 2016.
The Expo effect
According to Arabian Business, the IMF recently suggested that investments spurred by the Expo 2020 will allow Dubai to resist the economic impact of falling global oil values. IMF Advisor in the Middle East and Central Asia Department Zeine Zeidane argued that increased government spending in Dubai will spur a “rapid acceleration” to over 5% GDP expansion by 2020.
Adding further, he said that the Emirate’s “diversified economy” is allowing Dubai to compensate for the negative impact of lower oil prices which are affecting other regional oil exporters.The IMF expects Dubai’s inflation to drop from 4.1% in 2015, to 3.2% in 2016. Furthermore, the organisation believes that as a whole, the UAE economy will grow by 2.3% in 2016.
Zeidane shed further light on Dubai’s economic prospects going forward. He discussed the Dubai government’s plans to move its economy away from oil. This involves pushing forward structural reforms to achieve several aims. These include promoting the Emirate’s export industries, developing a knowledge-based economy and further bolstering Dubai’s private sector.
Zeidane outlined how Dubai’s government could make this strategy more effective. He suggested that Dubai should initiate a range of measures to improve its local business environment. These measures included easing restrictions to foreign ownership and fostering adequate public-private partnerships frameworks. Zeidane also advised Dubai to make it easier for its start-ups and small to medium-sized enterprises (SMEs) to access vital business financing.
Capitalising on opportunities
The UAE’s government recognises the economic potential of the World Expo 2020, as it could provide Dubai with the revenue needed to offset the impact of falling global oil prices. Writing in 2013, Gulf News noted that the event will bring 25 million visitors to Dubai, with travellers from abroad constituting 70% to 75% of attendees. Therefore, the World Expo will provide Dubai with a significant chance to boost consumer spending and facilitate economic growth.
The UAE’s government is striving to make the World Expo 2020 a success, recently announcing the theme for the Emirati pavilion. Estimates suggest that the Expo will bring Dh25bn in infrastructure projects to Dubai from 2013 to 2020. The economic benefits are already boosting Dubai’s economic fortunes by initiating government spending on infrastructure projects. SMEs are the engine of Dubai’s economy, so the Emirate’s government may wish to create an environment where these businesses can capitalise on the World Expo 2020 and thrive.
About Abdulrahman Al Ansari
Abdulrahman Al Ansari has more than 18 years of experience in the global financial services industry. He serves as the chairman of a number of reputable financial firms including AMA Investment Holding and Bid Capital Management Consultancy.
Abdulrahman’s professional portfolio encompasses a diverse range of sectors from commodities and natural resources to education, healthcare, oil & gas and investment banking. He has earned a reputation as an innovator, who consistently develops new ideas and solutions to address the complex and demanding challenges which confront his clients every day. Over the years, Abdulrahman has cultivated a special interest in the continued economic and community development of the UAE.