The growth in international passengers at Dubai’s main airport over the past decade has also given other industries from tourism to retail a boost, and they are expected to continue to thrive on the aviation sector’s expansion this year even after the recent plunge in oil prices, economists said.
Dubai International Airport announced yesterday that it expects 79 million passengers this year, becoming the world’s busiest in terms of international traffic last year, overtaking London’s Heathrow.
“To have that position as a regional strategic hub, you need to have good transportation, good access to the rest of the region and the world,” said Razan Nasser, a Dubai-based economist at HSBC. “Dubai has that geographic and time zone advantage and it has played quite well upon that with the airport story. It makes it very strategic for businesses to locate their headquarters here. And it’s also definitely played into the tourism and the trade stories.”
The UAE economy has been given a push in the past couple of years by government spending on infrastructure that has included not only airports but other civil projects such as roads, hospitals and museums.
Last year the economy of the UAE grew by more than 4 per cent, and while this year it may be slowed by lower oil prices, economists say the part of the country’s GDP that is not heavily dependent on hydrocarbons to make money will still flourish, including transport and tourism.
The aviation industry is expected to contribute 32 per cent to Dubai’s GDP by 2020, according to government estimates.
“Dubai’s economy is much more diversified [than others in the Arabian Gulf,” said Alp Eke, a senior economist at National Bank of Abu Dhabi. “Lower oil prices are going to have a multidirectional effect. While it will lead to contraction in the oil-related sector, it will have a positive boost in retail, tourism and the transportation sectors.”
Since June, the price of crude has declined by 60 per cent amid waning demand from emerging markets and an increase in production from North America. Oil revenue pays for some 60 per cent of the federal budget.
Rapidly expanding airport hubs in Dubai, Abu Dhabi and Doha are not only grabbing market share from Heathrow but other longer-established rivals in Europe as more international air traffic is routed through the Arabian Gulf.
“This announcement reflects the success of Dubai’s economic strategy,” said Carla Slim, the Middle East and North Africa economist at Standard Chartered bank. “It cements Dubai’s position as a major tourist destination in the region but also as a gateway for trade, logistics and regional services.
“Given that these are the core sectors and drivers of Dubai’s economy, we are not surprised to see that the emirate is receiving dividends from its investments.”
mkassem@thenational.ae
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