The IMF forecasts that $13 billion will be added to the UAE’s economy by the ending of sanctions on Iran, as trade between the two countries steps up between now and 2018.
That is equivalent to a 1% gain in real GDP growth each year over the next three years, the IMF said in its annual report on UAE economy, Abu Dhabi-based newspaper The National reported.
In 2013, Iran accounted for 12% of the UAE’s non-oil exports, valued at $12 billion that year. Most of this came in the form of reexports traded through Dubai’s Jebel Ali Port.
The impact from the lifting of sanctions could reportedly be much bigger, as Iranian tourists make their way back into Dubai’s hotels.
The number of hotel guests from Iran almost halved in the wake of sanctions, with 4,000 visiting in 2013, down from 8,000 in 2010.
The IMF estimates that about a quarter of all trade between the two countries has been permanently lost.
“The UAE is well positioned to benefit from an opening of the Iran market by serving as a transshipment point for renewed trade activity,” the IMF said.
Ahmed Badr, regional chief executive at investment bank Renaissance Capital, said: “Dubai and the UAE will most likely be the trade gateway to Iran because the country has the ports and infrastructure. It is the easiest place for multinationals to locate in order to invest in Iran.”
But investment from Iranians, who have had their money trapped in the country since its citizens were frozen out of the international Swift money transfer system, is also likely to make a big contribution to Dubai’s economy.
“We are going to see a lot of investment coming out of Iran coming into Dubai as well,” Badr said. “There is a lot of money in Iran; there was no flight of capital or pre-movement of capital before sanctions. So it makes sense that over the first two years, you will see this money entering Dubai. Dubai banks and real estate will benefit from the extra liquidity,” he said.
The Middle East Economic Digest estimates that there are about $167 billion of planned or underway energy projects that will become available to international investors after the lifting of sanctions. These include the construction of a $4.5 billion gas project off Kish island, and a $3.2 billion oil refinery in the west of Iran.
