Dubai Government Investment Fund Posts Record Profits As Local Economy Bounces Back

Investment Corporation of Dubai (ICD) has reported a record profit of AED36.1 billion ($9.8 billion) for 2022, helped by high oil prices, a rebound in the emirate’s tourism sector after the Covid-19 pandemic and a strong performance in the banking sector.

In results issued on May 31, the emirate’s sovereign wealth fund also reported record revenues of AED267.4 billion for the year, up 58% on the year before.

The fund attributed its performance to a jump in oil and gas revenues and a surge in travel and tourism activity. It was also helped by what it described as “strong fundamentals” in the real estate sector and record earnings from aluminium production.

ICD managing director Mohammed Ibrahim Al Shaibani said there were “improvements seen across all businesses”.

It said that revenue growth had outpaced its operational costs, boosting its profit margin. The biggest source of profits came from banking and financial services, which contributed AED15.3 billion, or 42% of the total.

At year-end, the fund’s assets were valued at AED1,177 billion. That is equivalent to $320.5 billion and leaves it just outside the top-ten largest sovereign wealth funds in the world, according to the rankings of the SWF Institute.

Local portfolio

ICD holds stakes in many of the key actors in the Dubai economy, including banks Emirates NBD and Dubai Islamic Bank, airlines Emirates and FlyDubai, oil and gas company Enoc and real estate developer Emaar.

Earlier in the month, Emirates had itself issued results for 2022 which included its highest-ever revenues and profits.

Other recent data confirm the healthy growth of the Dubai economy, not least in the critical tourism sector.

The emirate welcomed 14.4 million international overnight visitors in 2022. That was still some way behind the pre-pandemic total of 16.7 million in 2019, but the gap appears to be narrowing fast. In the first quarter of this year, some 4.7 million visitors arrived, not far off the 4.8 million for the equivalent period of 2019.

In addition, foreign direct investment (FDI) increased by 80% year-on-year in 2022 to reach AED47 billion, according to a recent report by Emirates NBD, with the biggest sources of inward investment being Canada, the UK and the U.S.

The figure for 2022 was still some 28% below the pre-Covid peak of AED65.8 billion recorded in 2019. However, the local authorities are aiming to increase FDI to AED60 billion a year by 2033.

That fits into a wider plan to double the size of the economy over the next decade, taking Dubai’s gross domestic product (GDP) from AED400 billion to AED800 billion by 2033.

Macroeconomic growth is helping to reduce the emirate’s debt burden. In a recent report, ratings agency S&P Global estimated Dubai’s government debts should fall to 51% of GDP this year, down from a high of 78% in 2020. However, it warned that broader public sector debt, including government-related entities, would remain high at about 100% of GDP.

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S&P said it expected Dubai’s economy to grow by 3% this year, down from 5% in 2022 and 6.2% in 2021 as the emirate moved out of its post-pandemic recovery to a more normal economic environment. It said it expected “continued strong momentum in the hospitality, real estate, trade, and financial services sectors to support growth”.

The economy’s fortunes have also been helped by the UAE’s continued openness to Russia – despite the misgivings of the U.S. and other western countries concerned about the opportunities this offers for those wanting to evade sanctions.

S&P pointed out in its report that “the Russia-Ukraine war has … led to large inflows of Russian nationals and capital. Notably, Russians were one of the emirate’s top five real estate buyers by nationality in 2022”.