Dubai’s private sector growth moderates
3.5% Estimated UAE real GDP growth expected in 2019
dubai — Dubai’s non-oil private sector growth moderated to fivemonth low in September despite an overall improvement in business conditions.
A contraction in employment and softer output growth contributed to the softening of growth as the third quarter ended on a weaker footing, according to data released by Emirates NBD Dubai Economy Tracker Index. However, business confidence across the non-oil private sector remained strongly positive during September, said the survey report. The seasonally adjusted composite indicator fell to 54.4 in September, down from 55.2 in August.
Khatija Haque, head of Mena Research at Emirates NBD, said the drop in index to 54.4 in September signalled the slowest rate of expansion since April. “Both output and new work increased in September but at a slightly slower rate than in August.”
At the sector level, travel & tourism was once again the weakest performing category at 51.3 in September, followed by construction (53.8) and wholesale & retail (55.5) respectively. Employment declined on average (49.2) in September, particularly in the travel & tourism sector. Selling prices in Dubai’s private sector declined for the fifth consecutive month, despite a modest rise in input costs. “This suggests that firms increased promotional activity and discounts in order to boost demand.”
According to the survey, stocks of pre-production inventories also rose at the slowest rate since July 2016, indicating less willingness on the part of firms to hold inventories. “Firms remain highly optimistic about future output however, with many citing Expo 2020 projects and marketing initiatives as reasons for expected higher output in one year’s time,” said Haque. Haque said output across Dubai’s non-oil private sector increased during September. “Although the rate of growth eased since August, it remained sharp overall and above the long-run average. Activity increased to the greatest extent in the wholesale & retail sector.”
Employment levels fell for the first time since March, and at the fastest pace since the survey began in January 2010. Some firms linked job shedding to cost cutting. That said, the rate of contraction was only slight. Selling prices in Dubai’s non-oil private sector continued to fall amid intense competitive pressures and promotional activity. The degree of price discounting was modest during September, with the latest decrease extending the current sequence of falling output charges to five months, said the banks report.
According to a Bank of America Merrill Lynch research note, the UAE’s non-oil economy is likely to turn a corner in 2019 with Dubai’s Expo 2020 infrastructure projects, changes to visa rules and increased government spending set to boost growth. The UAE real GDP growth is estimated to rise to 3.5 per cent in 2019 from a forecast 2.8 per cent increase this year and a 1.9 per cent increase in 2017.
The Expo 2020 event in Dubai could drive up GDP growth by two percentage points between 2020 and 2021 by boosting job creation, consumption and tourist numbers, said the report.