A jubilant Dubai hopes that hosting the world’s five-yearly trade fair in 2020 will draw new investment to an economy still recovering from a debt crisis that required a bailout by Abu Dhabi.
The United Arab Emirates city state saw off competition from Brazil, Russia and Turkey on Wednesday to win the right to host Expo 2020.
It expects the prize will give a welcome boost to an already reviving tourism- and property-based economy.
The fair site extends across 438 hectares (1,082 acres) of desert — 10 times the size of Vatican City — on the highway towards the UAE capital of Abu Dhabi, along which Dubai has been pushing much of its development.
The government projects the six-month fair will stimulate 25 billion dirhams ($6.8 billion/5 billion euros) in additional investment and 277,000 new jobs.
It forecasts a boost to gross domestic product of more than 140 billion dirhams ($38 billion), equivalent to around 44 percent of the 2012 total.
Deutsche Bank said Dubai needs some $43 billion to upgrade its infrastructure, the bulk of which would go into expanding hotels and other leisure facilities, with some $10 billion more for transport infrastructure.
“The successful Expo bid should act as a catalyst to wider investment growth in Dubai, largely aimed at increasing the capacity of the economy,” said Monica Malik, chief economist at EFG Hermes Emirates investment bank.
Although much of the investment earmarked for the fair was already part of a master development plan, Vision 2020, the win “will add to Dubai’s confidence and fast track implementation,” she said.
From sleepy backwater to bustling trade centre
The emirate heavily invested in transforming itself from a sleepy backwater in the 1950s to the bustling regional centre for tourism, trade, transport and financial services it is today.
“The Expo builds on Dubai’s core sectors, such as tourism, trade and transportation and will reach well beyond just the Expo site,” Malik said.
GDP growth is now expected to increase to between 5.5 percent and six percent in 2014, compared with 4.9 percent in the first half of this year, she said.
Barclays Bank too expected the fair to boost growth, to average 6.4 percent annually over the next three years, and potentially 10.5 percent annually to 2020.
The economy is recovering strongly from the financial crisis that led to a 2.4 percent contraction in 2009, as the emirate’s once-booming property sector tumbled and government-linked companies struggled under a mountain of debt.
Dubai sent jitters across global markets in November 2009, when it said it needed to freeze payments on some $26 billion owed by its largest group, Dubai World.
The conglomerate succeeded in reaching an agreement with lenders to restructure its obligations, but debt of some $103 billion continues to burden the government and state-linked firms, Barclays says.
Dubai’s economy, which unlike all other Gulf states has no oil revenues to depend on, grew 2.8 percent in 2010, 3.7 percent in 2011, and 4.4 percent in 2012, as its core sectors recovered.
The once-battered property market, which shed more than half of its peak value following the 2008 crisis, has bounced into recovery over the past year, and rents have also surged.
Property prices have risen by around 50 percent since the third quarter of 2011, but are still 45 percent below the peak of 2008, Deutsche Bank said.
The build-up to the vote for the Expo 2020 has been blamed for contributing to a spike in both purchase prices and rental values, as landlords anticipated a surge in demand.
Authorities have moved swiftly to try to avert any bubble, doubling property registration fees to four percent and tightening central bank lending rules.
Dubai property giant, Emaar, also recently barred agents from reselling off-plan property before handover.
“We believe that these new regulations are vital in limiting any further distortion of the market,” EFG’s Malik said.