Economic remedies: why Dubai will be spending in 2014

Published November 26th, 2013 - 08:54 GMT
Dubai’s Sheikh Mohammed bin Rashid Al Maktoum approved the 2014 budget yesterday that increases government spending by 11 percent (Courtesy of Gulf Business)
Dubai’s Sheikh Mohammed bin Rashid Al Maktoum approved the 2014 budget yesterday that increases government spending by 11 percent (Courtesy of Gulf Business)

While economic conditions continue to improve on the back of brisk tourism and trade, the Dubai government intends to beef up its spending and revenues next year to further solidify the emirate’s position as the leading economy in the region.

The Dubai government announced yesterday that it is set to increase its spending by 11 per cent to Dh37.88 billion and ramp up public revenues by 13 per cent to Dh37 billion in 2014.

The latest budget plan shows the deficit shrinking by a massive 85 per cent from 2010, when the budget gap stood at Dh6 billion. By next year, the government seeks to narrow the gap to less than a billion (Dh0.882 billion), down by 41 per cent from 2013.

His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, yesterday approved the 2014 budget in order to step up economic growth and boost the social services sector.

“The budget directly applies directives as set by His Highness to focus on a prudent fiscal policy that provides the stimuli necessary to economic growth in the emirate, raise the efficiency of government agencies to provide the best services and health and social care for all citizens and residents,” said a press statement issued by the government’s media office. As the emirate’s fundamentals continued to strengthen this year, thanks to growing key sectors, including tourism, trade and real estate, Dubai’s GDP growth accelerated  to 4.9 per cent in the first half of 2013, up from 4 per cent a year ago.

Abdul Rahman Saleh Al Saleh, director general of the Department of Finance (DOF) , said Dubai has succeeded in reducing the 2014 budget deficit by 41 per cent, compared to 2013.

Giyas Gokkent, chief economist at the National Bank of Abu Dhabi (NBAD), indicated that the government’s plan to increase its spending  will have a positive impact on the economy.

“A rise in government spending will further stimulate economic activity and is positive from that perspective,” Gokkent told Gulf News in an email.

He noted that the buoyant economy and higher projected revenues are giving more confidence to authorities to engage in an “expansionary fiscal stance”.

“Dubai has been consolidating fiscally in recent years, given that the debt burden and central government budget deficit has come down from Dh12.9 billion (-4.4 per cent  of GDP) in 2009 to Dh0.88 billion (-0.3 per cent of GDP) targeted in 2014,” said Gokkent. “The revenue target is in line with my expectations, while the expenditure target is higher. 

“[It must be noted that] there have also been additional revenue-raising measures, such as the hike in property registration fees, which also had the effect of addressing future overheating in that sector.”

Al Saleh said the government seeks to expand its spending in order to boost the local economy without sacrificing the strategic objectives of the government. The government is expected to generate the biggest chunk of its revenues (67 per cent) from the collection of fees and fines.

Revenues from this sector is forecast to increase by 24 per cent, but it is mainly due to “real economic growth”. Tax revenues are also expected to go up by 1 per cent, representing 21 per cent of total revenues and includes customs and foreign bank taxes.

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