Dubai's non-oil economy surges to 33-month high as Covid restrictions ease

Increase in new orders and strong tourism demand during Expo 2020 boosted growth

The Expo 2020 sign at Al Qudra Lakes and the Dubai skyline. Business conditions in the emirate's non-oil economy improved sharply in March. Photo: Uliana Shepotynnyk

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Business activity in Dubai's non-oil private sector economy surged in March to its strongest level in 33 months with new orders increasing as pandemic restrictions eased and Expo 2020 created strong tourism demand.

The headline S&P Global Dubai Purchasing Managers' Index climbed to 55.5 in March from 54.1 in February. A reading above the neutral 50 level indicates economic expansion, while one below points to a contraction.

Dubai's index reading is the strongest since June 2019. The emirate's non-oil private sector improved at a rate faster than the average in more than 12 years of survey data, S&P Global said.

“The Dubai PMI moved clear of its previous post-lockdown high in March,” S&P Global economist David Owen said. “The result rounded off another strong quarter in which relaxed pandemic measures and the Expo 2020 have brought increased economic activity and tourism demand.”

Businesses surveyed reported increased client demand in March on the back of rising confidence driven by the lifting of Covid-19 restrictions that had pulled back growth at the beginning of the year during the Omicron wave.

Although new business growth accelerated at a sharp pace, it was slightly weaker than the recent highs at the end of 2021.

Output levels in March also expanded at the fastest rate since July 2019, with more than a quarter of companies surveyed reporting an uplift at the end of the first quarter.

Travel and tourism registered strong growth as international tourists flocked to the emirate before the end of Expo 2020 at the end of March. Meanwhile, an increasing number of projects underlined the recovery of the construction sector in March.

"Output growth in both the travel and tourism and construction sectors also quickened to the highest [level] since June 2019, with the latter driven by a strong drive among contractors to complete outstanding projects," Mr Owen said. "Wholesale and retail activity likewise rose to a greater extent than in February."

The UAE economy bounced back strongly from the pandemic-driven slowdown in 2021 and the growth momentum has continued this year, boosted by Expo 2020 Dubai. The government’s mass testing and vaccination programme across the country has helped in curbing the pandemic and led to further opening of the economy across the Emirates.

The UAE’s non-oil economy expanded an annual 7.8 per cent in the fourth quarter of 2021, driven by easing of pandemic-related restrictions and travel curbs, the Central Bank of the UAE said in its Quarterly Economic Review.

Last week, Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, on Twitter said the country's economy grew 3.8 per cent in 2021, well above the 2.1 per cent estimate by the World Bank. The growth exceeded 2019 and was the highest in the region, he said.

The Emirates' gross domestic product growth was also above Emirates NBD's 2.5 per cent estimate for 2021. The lender expects UAE economic output to accelerate to 5.7 per cent this year.

Output growth in both the travel and tourism and construction sectors also quickened to the highest [level] since June 2019, with the latter driven by a strong drive among contractors to complete outstanding projects

David Owen,
economist, S&P Global

Dubai's economy grew 6.3 per cent year on year in the first nine months of 2021, according to preliminary data from the Dubai Statistics Centre. Emirates NBD estimates Dubai's economy grew about 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.

Dubai’s tourism sector has underpinned the emirate's economic recovery, with international visitor numbers in the fourth quarter having reached about 74 per cent of pre-pandemic levels. Dubai was among the first major global tourism destinations to open it borders under strict health and safety guidelines.

Data 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 Dubai property market also recorded its strongest start to a year, with 12,119 sales transactions until the last week of March, real estate data platform Property Monitor said. This was a 17.7 per cent increase in transactions compared with 2017, which was the previous best start to a year, according to the report.

With a faster uplift in non-oil economy, staffing levels in March also increased for the fourth month in a row.

Dubai businesses were also upbeat last month about the prospects of growth over the next 12 months. 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, S&P said.