Dubai population expected to decline 17pc

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UAE economy is expected to contract by 1.7 per cent in 2009

The UAE’s population will contract by a marked 5.5 per cent in 2009, driven largely by Dubai, where the population is expected to decline 17.1 per cent this year. This is a reflection of the change in the economic reality and is likely to further feed into growth performance, says  EFG Hermes in it’s most recent  report.

The UAE economy is expected to contract by 1.7 per cent in 2009, it said.

Nevertheless, the total UAE population will still remain above 2007 levels, it said.

It is believed that  the impact of the global financial crisis will be particularly harsh in Dubai, due to the highly leveraged and externally facing nature of it’s economy.

A slowdown or contraction is expected in a number of economic sectors, most notably in real estate and construction as projects are canceled or put on hold. The workforce  in the both sectors  will most probably decrease by over  30 per cent in 2009. The fall in population will further result in weaker demand for housing, the report said.

The study noted that there are limited data available and ‘these estimates are based on our breakdown of population components. Official comments indicate that Dubai’s population and labour force are still expanding’.

The report said the sharp fall in population will have a marked impact on private consumption, along with the greater economic uncertainty, correction in the property sector and lower tourism numbers.

‘We are seeing a sharp fall in rental prices in Dubai with the drop in population. There are also indications that rental prices in Abu Dhabi are stabilising. Given that housing is the largest component of the consumer inflation basket, we are now expecting deflation (of 2.0 per cent) in 2009,’ the report said.

It said that Abu Dhabi’s population will grow with the continued implementation and expansion of its investment plan, albeit at a slower rate than in 2008. Growth in the number of construction workers will slow to 7 per cent in 2009, from 15 per cent in 2008e. There will also be a deceleration in non-construction expatriate population growth to 5 per cent in 2009 from an estimated 10 per cent in the previous year.

Furthermore, the report said the national population of the UAE will continue to grow at more than 3 per cent on an annual basis.

‘These factors will help to limit the overall fall in UAE population in 2009, but will not be sufficient to compensate for the contraction in Dubai’s population,’ it said.

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