Business conditions in Dubai improved at the start of the second quarter in April at the steepest pace in 26 months, spurred by an uptick in construction, retail and wholesale activities, Emirates NBD said in its latest study.

Khatija Haque, head of Mena Research at Emirates NBD, said the latest Dubai Economy Tracker survey supports the bank's view that investment in infrastructure ahead of Expo 2020 would be a key driver of Dubai's growth over the next 2-3 years.

"It is encouraging to see the sharp rise in the construction sector index in April, as this had lagged both wholesale and retail trade and travel and tourism indices in the first quarter," she said.

The International Monetary Fund said last week that Dubai's economy would grow as fast as four per cent from 2.7 per cent in 2016, at a faster pace than most Arab economies. Underpinned by increased spending, including investment in preparation for Expo 2020, and a pick-up in global trade, Dubai's economic growth is poised to accelerate this year, Jihad Azour, IMF's Middle East and Central Asia Department Director, said.

The seasonally adjusted Emirates NBD Dubai Economy Tracker Index - a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy - rose from 56.6 to 57.7. "The headline index signalled the fastest upturn in operating conditions in 26 months," the bank said.

The latest upturn in private sector operating conditions was driven by a steep increase in output, led by wholesale & retail and construction. Survey respondents attributed greater business activity to more favourable economic conditions and new projects.

April data indicated robust performances across all three key sub-sectors monitored by the survey, led by an accelerated upturn in construction (index at 57.9), closely followed by wholesale & retail (57.8) and travel & tourism (57.0).

A reading of below 50.0 indicates that the non-oil private sector economy is generally declining; above 50­.0, that it is generally expanding. A reading of 50.0 signals no change.

The study showed that new business continued to rise for the 14^th consecutive month in April as result of a generally supportive economic backdrop and, in some instances, promotional discounts, and more construction projects. By sector, construction firms reported the strongest upturn in new business.

"Reflective of robust improvements in the health of all three key sub-sectors, Dubai private sector companies indicated greater optimism about their prospects for activity growth over the year ahead from March's seven-month low. Overall, the degree of positive sentiment was broadly in line with the average recorded since the series began in April 2012," the bank said.

Dr Bernd van Linder, CEO of Commercial Bank of Dubai, said on Monday the outlook for the UAE and Dubai in particular looks good. "For Dubai, 2017 looks like a reasonably good year. 2017 may look like 2016 but much of the pain is behind us now."

With the rate of inflation broadly in line with the trend recorded over the current 14-month sequence of rising prices, average cost burdens increased at a modest pace across Dubai's private sector in April, Emirates NBD study said.

While construction and wholesale & retail firms faced increased input costs, travel & tourism experienced a fall albeit Dubai's tourism sector kicked off 2017 in high gear with a 12 per cent year-on-year growth over the first two months of 2017, which saw the emirate welcoming just over three million visitors, nearly four times the rate of the previous year.

The bank noted that average selling prices continued to fall for the ninth month in succession in spite of rising costs. The rate of decline was faster than the preceding month and modest overall. All three key-sub sectors offered discounts to attract customers amid reports of intensive competition.

 

Source: WAM