Business conditions in Dubai's non-oil private sector economy improved sharply in February, shaking off Omicron jitters, as new orders rose and the travel and tourism sector continued to benefit from Expo 2020.
The emirate's seasonally adjusted IHS Markit Purchasing Managers' Index climbed to 54.1 in February after easing to a four-month low of 52.6 in January. A reading above the neutral 50 level indicates economic expansion, while one below points to a contraction.
Non-oil businesses attributed the significant rise in new orders to an upturn in client demand and a recovery in economic conditions after the Omicron wave slowed the pace of demand growth at the start of the year.
The rate of new order growth in February was one of the strongest seen since the start of the pandemic, beaten only by levels seen in the last quarter of 2021.
"New business growth in Dubai is a “promising sign that the Omicron variant has had only a minor impact on the economy compared to previous waves of the pandemic”, David Owen, an economist at IHS Markit, said.
The uptick in February sales was led by the travel and tourism sector of the emirate, which posted its strongest growth since June 2019, as a fall in global Covid-19 cases led countries to scale back travel restrictions.
"A loosening of global travel restrictions should help the tourism industry further in the final weeks of the Expo and throughout the rest of 2022," Mr Owen said.
New business growth also remained robust in the wholesale and retail sector, however, construction companies reported a modest increase in new work.
Dubai’s economy has bounced back strongly from the pandemic-driven slowdown in 2021 and the growth momentum has continued this year. The government’s mass testing and vaccination programme across the country has helped in curbing the pandemic, and the number of new Covid-19 cases in recent weeks have declined consistently.
The UAE reported 323 new Covid-19 cases on Tuesday – the lowest daily tally since December 20 last year. The country is among the most vaccinated in the world. Nearly 141 million tests have been carried out nationwide, under a robust screening strategy aimed at limiting the spread of the virus.
Dubai’s tourism sector has also recovered strongly from the challenges of the pandemic, with international visitor numbers in the fourth quarter reaching around 74 per cent of pre-pandemic levels. It was among the first major global tourism hubs to open it borders under strict health and safety guidelines.
Data published by Dubai’s Department of Economy and Tourism showed the emirate attracted 7.28 million international visitors last year, a 32 per cent year-on-year growth. In the fourth quarter alone it received 3.4 million visitors.
The emirate's economy grew 6.3 per cent year-on-year in the first nine months of 2021, underpinned by a strong rebound in hospitality, trade and real estate sectors, according to preliminary data from the Dubai Statistics Centre.
Emirates NBD, Dubai's biggest lender, estimates the emirate's economy grew around 5.5 per cent for the full year 2021 – an upward revision from its earlier forecast of 4 per cent. With slower global growth, higher interest rates and a stronger US dollar, the lender expects growth of 4 per cent to 4.5 per cent in 2022.
Despite headwinds at beginning of this year, non-oil companies managed to increase output levels in February, although the rate of expansion ticked down to a five-month low. Some panellists said delays in the arrival of freight shipments continued to constrain activity.
Although global supply chain bottlenecks remain a concern, businesses surveyed reported the softest increase in costs since November last year. With easing cost inflation, businesses lowered their output charges at a much quicker pace in February. The rate of discounting last month was the second-fastest since September 2020.
Looking ahead, Dubai non-oil companies continued to show confidence in the prospects of future growth. Overall business sentiment picked up from January's eight-month low, according to the latest survey results.
"These companies were hopeful that market conditions would pick up as pandemic restrictions continue to ease, bringing about a period of strong demand," Mr Owen said.