Gulf Tiger: What It Is, How It Works, Challenges

What Is the Gulf Tiger?

The term Gulf Tiger refers to the Middle Eastern city of Dubai, a major city located in the United Arab Emirates (UAE). It is one of the most important areas of trade and tourism in the Middle East and is noted for being the area's central hub of export trade. It has also become one of the largest hubs for financial and information technology industries in the world.

Dubai is the second wealthiest emirate in the UAE, after the capital of Abu Dhabi, and is home to the world's largest shopping mall and Burj Khalifa, the world's tallest building. The city's population was estimated to be 3.43 million in 2021, which is made up of about 95% expatriates and a local population of only 5%.

Understanding the Gulf Tiger

The Gulf Tiger has one of the fastest-growing economies in the Middle East, hence its nickname. Dubai, which is located south of the Persian Gulf on the Arabian Peninsula, is one of the most cosmopolitan cities in the region. It has the largest population and second-largest land area of the seven emirates in the UAE. It is also one of the top tourist destinations in the Middle East and home to the region’s busiest international airport.

Dubai staked its claim as a tiger economy, a nickname traditionally used to describe the booming economies in Southeast Asia, following several years of double-digit economic growth beginning in the mid-1990s. This is one of the reasons why it's also referred to as an Asian Gulf Tiger.

In 2021, the UAE had a gross domestic product (GDP) of $410 billion. While oil exports formed the initial foundation for its economy, Dubai diversified its economy into other areas, such as real estate, construction, trade, and financial services. Oil now makes up 8.3% of Dubai’s government revenue.

Investment in the city’s infrastructure has transformed Dubai into a financial, information technology, and real estate hub. The construction, finance, trade, tourism transport, and aviation sectors are among the main drivers of Dubai’s economy. The building boom in the first decade of the 2000s led to the construction of some of the world’s biggest buildings and most ambitious construction projects, including:

• Burj Khalifa, the world's tallest building
• the Palm Islands, three artificial islands located on the coast of Dubai
• Jebel Ali Port, the world's largest man-made harbor and the biggest port in the Middle East

Special Considerations

The city is committed to reducing its economic dependence on oil. Developing renewable energy resources is fueling the city’s continued growth. In January 2017, government officials announced a plan to significantly increase its dependence on renewable energy in the future, with a goal of producing 44% of Dubai’s energy from renewable sources by 2050. This entails an investment of $163 billion, which includes the expansion of Dubai’s infrastructure.

Challenges

The Gulf Tiger was hit hard following the 2007-2008 financial crisis, due in part to its reliance on tourism and construction. Foreign travel receded, which had a big impact on the retail sector, and several major construction projects came to a halt. Construction on the Dubai waterfront, slated to be the world’s largest waterfront, also stalled in 2009. Real estate prices also dropped. Some sectors in the city didn't see improvement until at least 2011.

Like other parts of the world, Dubai's economy was also hit by the global COVID-19 pandemic. Once again, the retail, tourism, and transportation sectors are the ones that were hit the hardest, with real GDP contracting by 10.8% in 2020. Reuters reported that the economy likely won't return back to previous levels until about 2023. The local economy is expected to bounce back in 2022-23. in part due to Expo, a large multinational convention which runs between October 2021 and March 2022.