Expo 2020 fuels confidence of Dubai's growth

Optimism especially high in manufacturing, services; stable selling prices set to drive revenues.

The manufacturing sector retained its lead with respect to expectations in terms of volumes sold,with 69 per cent firms expecting an increase in sales volumes in the next quarter. — KT file photo

Businessmen are looking more bullish in Dubai as Expo 2020 is attracting more new projects that are fuelling large companies’ confidence significantly.

The Dubai business community has been significantly more optimistic during the first quarter of 2014 compared to the same period of the previous year. Optimism is especially high among manufacturing and services firms, according to the quarterly business survey conducted by the Department of Economic Development, or DED.

The composite Business Confidence Index for Dubai stood at 135.5 points in the March quarter of 2014, an increase of 22.4 points from the same quarter in 2013. New projects expected as a result of Expo 2020 are driving positive perceptions.

Following on from the previous quarter, large companies continue to have a stronger outlook compared to small and medium firms, as indicated by their corresponding index scores of 141.6 and 126.4, respectively. Large companies are more optimistic than SMEs on all the parameters recorded in the survey.

From a sectoral perspective, optimism with respect to selling prices, volumes and new purchase orders is the highest within the manufacturing sector, while optimism on hiring plans and net profits is the highest amongst service firms.

Selling prices are largely expected to be stable, with 73 per cent of the respondents expecting “no change” while seven per cent expect a decline due to stiff competition in the market as well as the effect of seasonal downturn associated with the second quarter.

With prices largely expected to remain stable, the revenue increase estimates are largely driven by an expected increase in volumes. Respondents forecasting an increase in sales volumes during the second quarter of 2014 accounted for 63 per cent as against 54 per cent in the previous year.

In line with the expectations for sales volumes, 62 per cent of the respondents forecast an increase in new purchase orders in the second quarter of 2014. With respect to net profits, 54 per cent are expecting an increase on the back of improvement in demand for their products, whereas 10 per cent foresee a decline citing slowdown in business conditions and a decline in demand.

The businesses surveyed are more confident on hiring as compared to the same period last year but less confident compared to the previous quarter — 30 per cent intend to increase their staff count in the second quarter 2014 compared to 23 per cent in the same perio in 2013 and 39 per cent in the first quarter of this year.

The manufacturing sector retains its lead with respect to expectations in terms of volumes sold, with 69 per cent firms expecting an increase in sales volumes in the next quarter.

Within the services sector, firms in the construction, architecture and real estate sub-segment are extremely confident with respect to volumes of sales in the second quarter of 2014. On the other hand, expectations are subdued in the hotels and restaurants segment, mainly due to the impact of summer on tourist inflows and events.

Transportation firms maintain a strong outlook, with 65 per cent looking forward to better volumes accentuated by a growing population, rising construction activity, increasing trade (exports and imports) and a booming economy. Within the trading sector, building and construction, food and beverages, electronics and auto spare parts firms are particularly optimistic due to new contracts expected in the coming quarter.

The DED conducts the quarterly surveys as an effective tool to measure the pulse of the business community and allow the government and the private sector to track and analyse major trends and issues that have a bearing on economic activity in Dubai.

A total of 502 companies in Dubai were covered in the survey during the first quarter of 2014. The companies were asked to indicate if they anticipated an increase, decrease or no change in key indicators such as sales revenues, selling prices, volumes sold, profits and number of employees.

— abdulbasit@khaleejtimes.com