Growing businesses
Business conditions in Dubai recorded a sharp improvement in May — at the fastest pace in 13 months — on the back of increased output and new orders.
dubai — Business conditions in Dubai recorded a sharp improvement in May — at the fastest pace in 13 months — on the back of increased output and new orders.
Key drivers to this upward momentum in the non-oil private business included travel and tourism and wholesale and retail sectors, according to Emirates NBD Dubai Economy Tracker Index.
The index scored 57.6, up from 53.9 in April. The latest figure signalled a sharp improvement that was the strongest recorded since April 2017.
Wholesale and retail led the upturn on a sector basis, with an index reading of 58.3, closely followed by travel & tourism (57.3). At 54.6, down marginally from 54.9 in April, construction was the only sector to record softer growth in May.
According to some analysts, Dubai’s business sentiment in general, which has been getting a major fillip in the wake of a critical stimulus strategy unveiled in April by His Highness Sheikh Mohammad bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, would continue to improve in the coming months.
“The sharp rise in the Dubai Economy Tracker index supports our view that growth in Dubai will be faster this year relative to 2017, but the headline reading masks the squeeze on profit margins which is also evident in the survey data.
Firms, particularly in the wholesale and retail sector, cut prices aggressively to boost their output and new orders last month Khatija Haque, head of Mena research at Emirates NBD
Firms, particularly in the wholesale and retail sector, cut prices aggressively to boost their output and new orders last month,” said Khatija Haque, head of Mena research at Emirates NBD.
Analysts at Focus Economics said along with the new UAE investment law that would further boost FDI inflows, looser fiscal policy and large investments in infrastructure should prop up growth in the nonoil economy by supporting private investment momentum.
Along with higher oil prices and tourism, the new policies and measures are poised to help private consumption bounce back from VAT implementation, analysts said.
Official Central Bank statistics show that a total of Dh14 billion in cash has been pumped into the market by the regulator in April, the highest liquidity injected by the lender since the beginning of the year.
Santosh Varghese, general manager — MEA, Toshiba Gulf FZE, said the business environment in Dubai and other emirates is expected to improve further as the current spate of reforms and stimulus measures would go a long way in reinforcing the UAE’s position as a sought-after business destination.
“The stimulus packages launched by Dubai and Abu Dhabi along with the new federal rules for 10-year residency and 100 per cent company ownership by foreigners will not only serve as a catalyst to attract bigger flow of foreign direct investments but also help existing businesses tide over the challenges,” said Varghese.
According to Emirates NBD, output across Dubai’s non-oil private sector increased at the fastest pace in 40 months during May. Business activity has risen continuously on a monthly basis since March 2016.
“Despite steep increases in activity and new work, firms hired additional staff at only a fractional pace in May. Many respondents indicated that employment growth was restricted due to efforts to contain costs,” said the bank report.
“Continuing the current phase of growth that began in March 2016, latest data signalled a further improvement in new order books. Furthermore, the rate of growth accelerated to a 39-month high amid successful promotional activities and robust demand conditions,” said the report.
The bank noted in its study that positive sentiment towards future growth prospects reached a seriesrecord high in May. “New project wins, Expo 2020 and forecasts of robust demand underpinned business confidence.”