Dubai's rebounding property market is helping to boost the economy once again after several years as a dead weight on growth, a government report suggests.
The emirate's rebounding property market - combined with a strong performance in trade, manufacturing, transport and finance - lifted the emirate's GDP to more than 4 per cent in the first half of the year, estimate officials.
Together, property and construction contributed 21 per cent of Dubai's growth in the first quarter, second only to wholesale and retail trade, which accounted for 28 per cent of the expansion, a report released yesterday by the Dubai Economic Council showed.
Industry (15 per cent), transport and finance (14 per cent each) were the next largest drivers.
Economic growth reached 4.1 per cent during the first quarter of the year and was expected to rise to up to 4.7 per cent during the second quarter, according to the Dubai Economic Outlook first-quarter report.
"Dubai's economy has employed the momentum witnessed last year to inaugurate 2013 with unprecedented growth on both macro and micro levels," said Hani Al Hamli, the secretary general of DEC. "This is clear from the perceived growth in the key sectors: trade, tourism, in addition to other sectors including real estate."
Despite forming a small slice of Dubai's economy, the report said oil revenue growth was improving. Net oil revenues climbed by almost 40 per cent between 2010 and this year, to Dh3.9 billion. Net oil revenue would account for 12 per cent of total revenue this year, it added.
The report estimated the Dubai Government's deficit fell from Dh1.8bn last year to Dh1.5bn this year as a result of a 7.2 per cent climb in revenues to Dh32.6bn.
Brisker trade, manufacturing and tourism helped to lead Dubai to recovery after a debt-fuelled collapse in the property market dragged the economy into recession in 2009 amid the global financial crisis.
But after almost four years of stagnation, confidence is slowly returning to the property market, signalled by a pickup in building along with land and property sales.
The average price per square metre of residential apartments rose by about a quarter in the first three months of the year, compared with the same period of last year, the report said. Traders from Pakistan, India, the United Kingdom, Iran, UAE and Russia were among the leading investors in the market, raising the value of apartment sales during the period.
The pace of the property recovery has led to concerns by some about its sustainability. Speaking in May, Masood Ahmed, the director of the IMF's Middle East and Central Asia Department, said it was important "measures are in place to moderate the pace of growth to avoid any risk of the boom and bust cycle".
The economic council's report showed other sectors were also growing. The tourism sector appeared to be exceeding the performance of the end of last year, it said.
Guests at hotels and hotel apartments rose by 4.7 per cent to 2.85 million during the first quarter from the last quarter of 2012. Despite a rise in the number of hotels, occupancy rates reached 90 per cent, up from 85 per cent last year.
Activities and events staged in the emirate helped to attract visitors from Russia, the UK, Saudi Arabia and India, the report said. A total of 4.66 million visitors attended the Dubai Shopping Festival, held at the start of the year.
Performance in the banking system was experiencing "significant improvement", the report added. Deposits rose by 8.3 per cent, with loans accelerating by 1.4 per cent in the first quarter.
The banking ratio of loans to deposits improved from 89.2 per cent at the end of the fourth quarter last year to 86 per cent in the first quarter of this year. Personal loans accounted for 29.9 per cent of total lending, followed by property and construction at 16.8 per cent and manufacturing at 4.1 per cent.
Inflation in the first quarter rose by 0.6 per cent compared with the same period of last year.