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Tourism rebound, new projects drive Dubai growth to 33-month high

Dubai businesses signaled a boost to client demand — often linked to the lifting of Covid-19 curbs

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Dubai’s business growth recorded a 33-month high in March, driven by a rebound in international tourism and a surge in building projects as output picked up at a marked rate in response to stronger new business intakes.

Purchasing Managers’ Index data, a key barometer of the economic and business scenario, indicated a further surge in growth across the Dubai non-oil economy as confidence in future activity rose to the highest level since December, economists and analysts said.

David Owen, economist at S&P Global, said the Dubai PMI moved clear of its previous post-lockdown high in March, registering the strongest performance in the non-oil sector since June 2019.

“The result rounded off another strong quarter in which relaxed pandemic measures and the Expo 2020 have brought increased economic activity and tourism demand.”

March PMI data indicated a further boost in supplier performance enabled firms to expand their inventories for the first time in four months.

“Confidence in future activity rose to the highest since December, despite a concurrent uplift in cost pressures as energy and raw material prices surged.”

The PMI survey, which covers the Dubai non-oil private sector economy, with additional sector data published for travel & tourism, wholesale & retail and construction, surged to 55.5 in March, its highest level since June 2019, rising from 54.1 in February and for the second month in a row.

The index suggested that the health of the non-oil private sector had improved sharply, and to a greater extent than seen on average over 12 years of survey data. Dubai businesses signalled a boost to client demand in March, often linked to the lifting of Covid-19 measures and improving confidence.

An upturn in consumer confidence, driven by the trickle-down effect of higher oil prices and a robust tourism activity resulting from Expo 2020, reflected the buoyancy of the economy and the business sector.

The UAE economy is expected to grow by five per cent to six per cent this year and by the same pace over the next few years to help double the economy by 2031, according to Abdulla bin Touq Al Marri, Minister of Economy. The country’s non-oil economy has benefited from public spending, credit growth, improving business sentiment, and World Expo 2020.

Real estate experts expect 2022 to deliver moderate increases in prices and rents as well as strong sales, which will encourage developers to continue to launch new projects as Dubai’s economy sustained its upswing after expanding at an estimated 3.5 per cent in 2021. “Despite the on-going geopolitical tensions and their economic fallout across the region, Dubai is poised to attract increased focus as a safe haven for wealthy individuals,” said PNC Menon, chairman of Sobha Group.

“Positive sentiment toward business and economy in the UAE has been buoyed by some of the highest hotel occupancy rates in the world, substantial economic investment and the adept handling of global crises. Business confidence increased over two per cent, and economic confidence increased by 0.5 per cent in January,” Paul Kelly, managing partner of D/A, a leading consumer intelligence company.

Owen said output growth in Dubai’s travel and tourism and construction sectors also quickened to the highest since June 2019, with the latter driven by a strong drive among contractors to complete outstanding projects. Wholesale & retail activity likewise rose to a greater extent than in February.

“The global surge in commodity prices due to the war in Ukraine had an impact on Dubai businesses during March, with costs rising at the quickest rate in three months. While some firms opted to pass these expenses onto clients, the urge to support sales growth meant that average selling prices continued to fall.”

The PMI survey revealed that following the faster uplift in business conditions, Dubai firms were more confident that activity would grow over the next 12 months during March. The degree of optimism picked up for the second straight month to the highest since December, and was slightly above the average seen in 2021.

“With firms often commenting on sales in the pipeline and expectations of further new business growth, the latest data pointed to renewed efforts to stockpile inputs. Overall inventories rose for the first time since November last year, although the rate of accumulation was mild.”

— issacjohn@khaleejtimes.com