Big budget boost for expansion in Dubai

Construction sector the biggest winner as emirate prepares for Expo 2020, with utilities and transport spending to rise

Dubai plans to increase infrastructure spending next year as the emirate unveils a Dh47.3 billion budget to create thousands of jobs.

The construction sector will receive a major boost from a 27 per cent jump in spending as the emirate prepares for Expo 2020.

The budget shows a 3 per cent rise in Government expenditure, state news agency Wam reported yesterday, while revenues will be lower owing to the restructuring of the budget. It anticipates a deficit of Dh2.5bn, representing 0.6 per cent of GDP.

“The critical point is the focus and increase in infrastructure spending,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. “We also expect to see an acceleration in investments by government-related entities including on the utility and transport fronts.” The bank expects UAE real non-oil GDP to rise to 2.8 per cent next year from 2.3 per cent this year.

Regional economies are expected to continue to post fiscal deficits next year as lower oil prices eat up revenues. That has led some countries to turn to international bond markets to raise money, including Saudi Arabia which issued a $17.5bn (Dh64.26bn) bond this year.

The increased infrastructure spending in Dubai will constitute 17 per cent of the total as the emirate forges ahead with projects for Expo 2020.

Nearly 76 per cent of revenue will be generated from government fees, with 6 per cent from oil and customs duties and taxes accounting for 16 per cent.

The budget, which will create 3,500 jobs, allocates 33 per cent of spending to wages. General and administrative expenses, subsidies and grants represent 47 per cent of expenditure.

A draft law to approve the UAE’s federal budget for next year – which estimated expenditure for the year at Dh48.7bn and revenue at Dh47.696bn – was passed by the Federal National Council on Tuesday.

The IMF believes that growth in the UAE’s non-oil economy will slow next year, as the two biggest emirates – Abu Dhabi and Dubai – experience contrasting economic fortunes.

Overall growth in the UAE will fall to 2.3 per cent this year with a slight recovery to 2.5 per cent next year. Growth in Dubai will fall to 3.3 per cent, before recovering to 3.6 per cent next year.

Abu Dhabi has yet to release its budget for next year.