Dubai Expo 2020 to fuel GCC construction boom

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Dubai Expo 2020 will fuel a massive construction boom throughout the Emirate.
The rest of the GCC will see growth in their construction and related sectors.

Dubai expo GCC construction

The next seven years will see a mass of prospects for the Emirate allowing it to shape its future and add to its allure as a global business hub, analysts say.

According to Standard Chartered bank’s report, the event is set to raise confidence in Dubai’s housing sector by supporting long-term demand dynamics and underpinning fundamentals as the main driver of the property market recovery, while most infrastructure and allied housing facilities will be built in the somewhat less inhabited southern part of the city, which will add to Dubai’s expansion.

Twenty-five million people are likely to visit the Dubai Expo, of which 70 percent will come from outside the UAE.

“We expect the supply of hotels to expand, particularly in the vicinity of the site. Hotel occupancy rates should rise during the six months of the event. A key focus for Dubai will be to maintain tourist inflows afterwards to prevent an oversupplied hospitality sector,” the bank said.

Officials estimate the event would create around USD 23 billion of GDP (25% of Dubai’s current GDP) over the next seven years, draw some 20 million visitors and generate 300,000 new jobs. They also say that the Emirate’s GDP is anticipated to increase 2 percent over the next few years.

“Providing it achieves its attendance targets, Dubai Expo could prove highly profitable. Official authorities estimate the event will generate nearly USD 17.7 billion in added value to the UAE economy and that for every U.S. dollar spent by Dubai, its economy should reap a six-fold return,” Standard Chartered Bank said in a note.

The UAE government has declared plans for USD 8 billion of infrastructure costs for the event, with the speeding up of procedure to expand the Dubai metro, rail and road networks. A report from HSBC estimated that there would be a further USD 10 billion of private sector spending to cover all the costs of putting on the Expo.

This investment will generate new jobs, draw in workers and provide an added boost to consumption. In 2020 itself, the Expo could attract up to 50 million visitors based on the experience of previous events, providing a strong boost to tourism and consumption, analysts say.

Egyptian investment bank EFG-Hermes says the Expo 2020 effect to be evident as early as next year with GDP leaping 5.4 percent against its earlier estimate of 4.5 percent.

“Our growth upgrade is largely due to a pickup in the investment outlook as a result of the successful bid, although we also see an associated pickup in consumption.” — EFG-Hermes Bank

As the World Cup is being held in Qatar in 2022, the combination of both events in a fairly short time frame should offer significant momentum to growth in the UAE, Qatar and the GCC as a whole.

Dubai’s government has been promoting the event as beneficial for the GCC region. The increase in activity in the UAE should lead to spillover economic benefits to the rest of the region, supporting jobs and economic growth in the GCC. In combination with the 2022 World Cup in Qatar, the GCC region looks set for dynamic growth early next decade.

In contrast, some analysts warn that the extra demand generated in the GCC infrastructure sector by the 2020 World Expo and the 2022 FIFA World Cup could form pressures on regional supply chains, driving up the cost of raw materials and fueling real estate and asset-price bubbles.

Cost of living increases could wear away the competitiveness of these economics. Buoyancy about Dubai winning the World Expo has lifted the stock market 82 percent year-to-date.

Dubai also expects to garner long-term benefits from Dubai Expo by weighting the event as a channel for economic change. The 2010 World Expo in Shanghai, China, helped transform a former-industrial area into a booming cultural and commercial district.

The plan of Expo is to bring people together to build connections and advance economic and cultural development across the globe. The Dubai World Expo theme, Connecting Minds, Creating the Future is targeted to help initiate fresh collaborations for economic growth and sustainability for the future.

Photo: Daniel Cheong

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