Dubai businesses more upbeat on improving market conditions

With the Expo 2020 and a big surge in the inflow of tourists expected to revitalise commercial activity, businesses in Dubai are getting more upbeat on improving market conditions and strong prospects for international reach, Dubai Economy said.
The quarterly survey of Dubai Economy showed that the proportion of firms anticipating improvement in business situation in the first quarter of 2020 has increased to 60 per cent, from 58 per cent for the previous quarter, with the Expo 2020 and tourist arrivals expected to energise commercial activity.
In a statement, Dubai Economy said while softer demand, lower margins and less projects have had an impact in the last quarter of 2019 when 19 per cent businesses rated their performance as below par, the first quarter of 2020 is expected to bring in new purchase orders, increased volumes and more jobs.
Ali Ibrahim, deputy director-general of Dubai Economy, said the prevailing sentiment showed businesses in Dubai continue to go past challenges and make the best use of opportunities available to target new customers and markets.
"Initiatives to reinforce Dubai as a gateway and enhance ease of doing business have had a significant impact on overall economic activity in the emirate and particularly on trade and tourism," he said.
"While the Dubai Industrial Strategy 2030 has energised the domestic manufacturing sector and diversified exports out of Dubai, local firms see an unprecedented opportunity for international exposure in the Expo 2020," said Ibrahim.
He said exporters targeting new markets and SMEs enhancing their competitiveness are particularly significant in the context of the external orientation and innovation focus of Dubai's economy.
Businesses in Dubai also count on the Expo to improve their credibility and relations with international companies, thus opening up opportunities for growth and exports. Exporters are slightly more optimistic than the overall business community with composite Business Confidence Index (BCI) scores of 128.8 points and 125.6 points, respectively.
The survey shows that among 70 per cent of the respondents who stated that they have expectations about Expo 2020, 56 per cent expect rise in commercial activity, 20 per cent expect improvement in business/market conditions, 14 per cent expect increase in visitor activity and seven per cent foresee increase in construction activity.
Economists and analysts argue that a host of proactive initiatives, reforms and incentive projects have been positively impacting the investment climate of Dubai, leading to enhanced consumer confidence in the economy.
Analysts see a rebound business optimism surrounding future output with corporates looking to the upcoming World Expo in 2020. They expect the overall economic momentum to be higher, spurring real GDP growth. The official economic outlook for Dubai foresees 3.2 per cent growth in 2020 and 3 per cent in 2021.
MUFG Bank economists expect Dubai to witness a rebound in economic growth this year due to a confluence of factors including, stronger corporate activity, higher real estate prices and renewed business optimism. S&P Global has predicted that Dubai's GDP would increase at about 2.5 per cent a year until 2022 and much of the increase could come from economic activity associated with Expo 2020.
According Dubai Economy survey, projection for volumes has displayed a year-on-year (y-o-y) increase, with net balance increasing from 47 per cent for first quarter, 2019 to 53 per cent for first quarter, 2020, as businesses expected improvement in economic & business conditions and seasonal demand. "A stronger forecast for volumes has resulted in a more optimistic outlook for profits, with 62 per cent of firms expecting net profits to increase in first quarter, 2020 as compared to 54 per cent for first quarter, 2019.
Despite competitive pressure, firms are optimistic about the level of selling prices for the upcoming quarter.
Hiring intentions have improved on a quarter-on-quarter basis to meet the expected rise in demand, with net balance increasing from 14 per cent for fourth quarter, 2019 to 16 per cent for first quarter, 2020.
Manufacturing sector is more confident about its business prospects for parameters like wage levels, sales revenue, volumes, profits and hiring as compared to services and trading sectors. Within manufacturing, the metal segment is most optimistic about volumes for Q1, 2020, registering a net balance of 75 per cent, supported by expected improvement in business conditions and demand, ahead of Expo 2020. In the trading sector, food & beverages and textile segments are most optimistic about volumes for the upcoming quarter.
Within services sector, tourism & hospitality (hotels & restaurants, travel and car rentals) and transportation segments are optimistic about volumes and expect better market conditions in the upcoming quarter. - issacjohn@khaleejtimes.com
- issacjohn@khaleejtimes.com