Dubai budget sets record spending to boost growth ahead of Expo 2020

DUBAI (Reuters) - Dubai expects to substantially increase state spending next year to stimulate the emirate’s economy and support the Expo 2020 world fair, according to the 2020 budget released on Sunday.

Slideshow ( 4 images )

State spending will increase by 17% to a record 66.4 billion dirhams ($18.1 billion), compared with 56.8 billion seen in the budget plan for 2019, a Dubai government statement said.

The increase is despite infrastructure spending being set to drop for a second consecutive year, to 8 billion dirhams, as the emirate nears the start of Expo 2020.

Dubai, with a diversified trade and tourism economy but which does not have vast oil wealth and which has faced a real estate market downturn since prices peaked in 2014, is banking on Expo 2020 to boost economic activity.

It has spent heavily in preparation for the six months long fair, which starts in October, although it has tapered its investment as associated projects were completed.

It did not say what accounted for the planned additional spending, but did say salary and wage allowances in the 2020 budget accounted for 30% of total expenditure while grants and support accounted for 24%.

The government also announced a special reserve of 3% of total expected expenditures as part of preparation for the Expo 2020.

Dubai previously projected its economy will grow 3.2% in 2020, faster than the 2.1% growth in 2019. It grew by 1.94% in 2018, its slowest pace since a contraction in 2009 when the economy was hobbled by a debt crisis.

Excluding investment spending and non-recurring revenue it could achieve an operating surplus of 1.96 billion dirhams in 2020, the government said. It had projected an operating surplus of 850 million dirhams in 2019.

The overall deficit was projected at 2.4 billion dirhams in 2020, narrowing from a budgeted 5.8 billion dirhams in 2019.

State revenues are projected to increase 25% to 64 billion dirhams, despite previous decisions to cut and freeze some fees for businesses. Revenues had been projected to grow by just 1.2% in the 2019 budget.

Non-tax revenue will account for 60% of total expected revenue, while tax revenue should account for 29%. Revenue from government investment represent 5% and oil revenue will account for 6%.

Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum also adopted a three-year budget cycle from 2020 to 2022 with total expenditure of 196 billion dirhams.

($1 = 3.6730 UAE dirham)

Reporting by Saeed Azhar; Additional reporting by Asma Alsharif; Writing by Alexander Cornwell; Editing by Louise Heavens and David Holmes