Dubai economy grows 4.1% in H1; seen staying strong

Reuters/Dubai

Dubai’s economy expanded 4.1% from a year earlier in the first half of this year, official data showed yesterday, indicating the emirate is holding up well in a weak global environment.

Foreign trade, including re-exports, rose 11.4% in the first half, according to Reuters calculations. That was roughly half the growth rate seen a year ago; in addition to global conditions, international sanctions against Iran over its nuclear programme have hit Dubai’s trade with that country.

Nevertheless, Dubai’s gross domestic product growth in the first half was faster than 3.4% recorded in 2011. A major reason was booming tourism.

Hotel guest numbers in the emirate jumped 9.6% to 5mn in January-June, while hotels and restaurants saw a 16.1% surge in their business, said Arif Obaid al-Muhairi, executive director at the Dubai Statistics Center.

“These indicators are moving towards growth because of the diversity of Dubai’s tourism product,” he said in a statement. “That helps attract more tourists, which reflects positively on demand in related activities and improves performance of the local economy.” Wholesale and retail businesses, which make up nearly a third of Dubai’s GDP, grew 3.8% in the first six months of 2012. The real estate and business services sector rose 1.5%.

The Dubai housing market, where prices and rents crashed in 2008-2009, has been recovering gradually but bank lending in the UAE remains sluggish.

Al-Muhairi said the Dubai government’s latest plans for huge tourism and retail developments would help boost tourist numbers and contribute to economic growth.

Dubai’s ruler Sheikh Mohammed bin Rashid al-Maktoum announced on Saturday a plan to build a massive complex that would include 100 hotels, the world’s largest shopping mall and a park larger than London’s Hyde Park.

“We see a strong growth outlook for Dubai next year, supported with a continued favourable outlook for consumption and a gradual pick-up in investment,” said Monica Malik, chief economist at EFG-Hermes in Dubai.

Dubai is still restructuring billions of dollars of debt in the wake of the property crash, and its entities are expected to face nearly $50bn of liabilities maturing between 2014 and 2016. However, Malik said this debt overhang would not prevent the emirate from obtaining sufficient financing.

“We see Dubai continuing to access foreign funding, which remains vital both for supporting the investment programme and for the debt management position.”

‘Dubai Group cuts half of staff in $10bn restructuring’

Reuters/Dubai

Dubai Group, part of the ruler of Dubai’s personal empire, has cut half its staff of about 30 people as part of cost-cutting measures in its $10bn restructuring, three sources told Reuters yesterday.

Among those to leave the firm is chief investment officer Trevor Regan, who joined the company in December 2011, one of the sources said, speaking on condition of anonymity as the information is not public.

“We can confirm that a number of staff have been made redundant as part of the constant cost review process, this will not impact the management of our investment portfolio,” a Dubai Group spokesman said in an e-mailed statement.

Most of the cuts are in back office roles such as IT and are part of a plan to reduce costs at the firm to make it more attractive to lenders considering a restructuring proposal.

“The company has been very aggressively paring back costs to a bare minimum,” a second source aware of the move said.

“There were always going to be some changes to make the company more efficient going forward,” a third source added.

Dubai Group, part of Dubai Holding, was hit hard by the global financial crisis in 2008 due to excessive use of leverage in its investments and a sharp decline in asset values.

It has been in negotiations with creditor banks, which are owed $6bn of the total, since missing interest payments on two loan facilities in 2010. The remaining $4bn is owed to shareholders and classified as internal lending.

Dubai Group wants time for asset values to recover before making sales in order to pay back its debts and has proposed extending maturities for between 3.5 and 12 years.

However, three international banks began unprecedented legal action in September to secure repayment of debts after running out of patience with the negotiations.