Upbeat 2018 outlook spurs Dubai business sentiment

Driven by increased demand during the winter months, businesses in Dubai, mostly those in services and manufacturing sectors, are more upbeat about the final quarter of 2017 compared to the previous quarter, Dubai Economy said on Sunday.
A survey by Dubai Economy shows that the outlook for the fourth quarter 2017 is stronger than the previous quarter across all the parameters, supported by expectations of a higher number of tourists during the winter season, more customers, new projects and government support for Expo 2020 oriented businesses. The quarterly survey of Dubai Economy shows that the structural reforms and economic diversification in Dubai along with a strong forecast from the International Monetary Fund (IMF) have apparently fuelled business confidence after subdued growth in 2016.
The IMF has forecast UAE's GDP to grow 3.5 per cent in 2018 compared to 2.9 per cent and 3.3 per cent in 2016 and 2017, respectively, largely on the back of improved non-oil sector growth and stronger external demand. The survey shows that the composite Business Confidence Index (BCI) in the third quarter increasing by 10.8 points and reaching 121.4 points, from 110.6 points in the second quarter of 2017.
A joint report by the Institute of Chartered Accountants in England and Wales and Oxford Economics said the UAE would record an accelerated growth in 2018 to 3.6 per cent. The momentum will further gain pace in 2019 to post 3.6 per cent growth.
The Institute of International Finance (IIF) affirms that the UAE is on track to be one of the best performers among the Middle East and North African economies over the next five years as its vibrant growth continues to be driven by trade and tourism.
"The UAE continues to be the best managed economy in the region. It possesses large financial buffers - estimated at around $670 billion, safe-haven status, excellent infrastructure and a relatively diversified business-friendly economy, which will help the economy cope with the prolonged low oil price environment," the IIF said.
In Dubai, large companies are more optimistic than the small and medium enterprises with respect to the business outlook, with composite BCI scores of 126.5 points and 113.8 points, respectively. The services sector is most optimistic regarding its outlook for volumes for the fourth quarter of 2017, followed by the manufacturing sector, Dubai Economy said in its report.
"Exporters are less bullish than the overall business community, with composite BCI scores of 111.8 and 121.4 points, respectively. Domestic market oriented firms hold stronger predictions than exporters for sales revenues, selling prices, volumes, net profits and hiring," Dubai Economy said.
The proportion of firms that anticipate an improvement in the business environment stands at 48 per cent for the fourth quarter compared to 39 per cent for the previous quarter. Additionally, 29 per cent of the survey respondents do not anticipate any obstacles to their business operations during the final quarter of 2017. Plans to upgrade technology have strengthened both on a quarterly and annual basis.
The selling prices forecast is also more bullish for the fourth quarter compared to the previous quarter, driven by predictions of higher demand, rise in the price of raw materials and hopes of getting new projects.
Projections for sales revenues are stronger both on a q-o-q and y-o-y basis, with the net balance increasing from 37 per cent in the fourth quarter of 2016 to 44 per cent for the same quarter in 2017. The seasonal rise in demand has resulted in a stronger outlook for volumes; the net balance has increased from 30 per cent for the third quarter 2017 to 37 per cent for the fourth quarter 2017. Half of the respondents anticipate higher volumes during fourth quarter, bolstered by expectations of higher demand, more customers and new projects while 37 per cent of the businesses expect no change in the parameter.  
A comparison of projections among the key economic sectors shows that the services sector holds the strongest outlook for sales revenues, selling prices, volumes, net profits and new purchase orders. The manufacturing sector is the most optimistic about hiring during the last quarter of 2017. Traders hold the weakest forecast for revenues, selling prices, volumes, hiring and new purchase orders.
Within the services sector, hotels and restaurants are most bullish about their volumes, with a net balance of 84 per cent. The other services segments - hospitality, construction and transportation - also hold robust forecasts for volumes. Within the trading sector, companies in the food and beverages segment are most optimistic about their volumes during the fourth quarter of 2017.
- issacjohn@khaleejtimes.com