Dubai's population to fall by 17pc this year

Dubai’s population is set to fall 17 percent this year as the former boomtown suffers from a real estate slump that could cause the UAE economy to contract for the first time in about 15 years, EFG-Hermes said yesterday.

Consumer prices in the United Arab Emirates, the second largest Arab economy, are also set to fall this year as the global financial crisis pressures rents and consumer demand, the Egyptian investment bank said in a research note.

“We believe the impact of the global financial crisis will be particularly harsh in Dubai, compared to the other emirates and the rest of the region,” EFG-Hermes said. “This is because of both the highly leveraged and externally facing nature of the Dubai economy.”

EFG forecasts the population of Dubai will fall around 17 percent in 2009 to 1.49 million, from an estimated 1.79 million in 2008.

As hundreds of billions of dollars worth of UAE projects are cancelled or put on hold, the Gulf oil exporter’s real estate and construction sectors face a sharp slowdown, EFG said.

Thousands of people have already lost their jobs in Dubai, which could see its construction population fall 30 percent this year and population in other fields decline 13 percent, EFG said. The overall UAE population would fall 5.5 percent, it said.

“The fall in the UAE’s population will further add to the downward pressure on the economy and will have a marked impact on domestic demand,” EFG said, adding private consumption could fall just over 13 percent in nominal terms this year.

EFG expects the UAE economy will shrink 1.7 percent in 2009, compared with a January forecast of a 0.04-percent contraction, as the world’s fifth-largest oil exporter cuts crude output due to falling demand.

That would be the first contraction since 1993. The investment bank had participated in a Reuters poll of 14 economists this month in which the median real gross domestic product forecast was for the UAE economy to stagnate this year. The UAE economy expanded 7.4 percent in 2008, the ministry of economy said last week.

“With the correction in the real estate sector, the level of wealth destruction will be greater than in other Gulf countries. Consumption will be further suppressed with the fall in tourism numbers and spending,” EFG said.