Operating conditions in Dubai’s non-oil private sector improved at their strongest rate since June last year due to increased government spending and growing optimism in the run-up to Expo 2020.
The seasonally adjusted Emirates NBD Dubai Economy Tracker Index – a composite indicator designed to give an overview of operating conditions in the non-oil private sector economy – improved to 55.8 in January from 53.7 in December. A reading below 50 indicates that the non-oil private sector economy is generally declining and above 50 means it is generally expanding. A reading of 50 signals no change.
“The Dubai Economy Tracker has started the year on a positive footing,” said Khatija Haque, head of Mena Research at Emirates NBD, the emirate's largest lender by assets.
“This marks a recovery from the weak growth in Q4 2018 and reaffirms our view that the Dubai economy will strengthen in 2019, owing to greater government spending and ongoing Expo preparations.”
The UAE government has introduced a series of measures and laws to buoy economic growth. These initiatives include increased government spending, offering long-term visas to expatriates working in certain industries, allowing full foreign ownership in selected businesses outside freezones and lowering the cost of doing business.
Business conditions in the UAE’s non-oil private sector improved to a seven-month high in January, on the back of faster output growth and new orders, Emirates NBD said earlier this month.
The latest reading of the Dubai tracker signalled the strongest overall improvement in the business climate since June, and was above both the overall trend of 55 for 2018 and the series history of 55.2 since January 2010.
"Total activity and new business both rose at marked rates despite only a slight increase in employment, suggesting companies were focusing on efforts to boost productivity," Emirates NBD said.
Total commercial activity and new business in Dubai rose at marked rates in January as companies focused on boosting productivity, with the tracker showing a rise in output and new orders.
In addition, companies were most optimistic about future growth prospects since at least 2012, the lender said.
The rise in January was driven by the wholesale and retail segment, which posted the strongest overall improvement in business conditions at 56.3, followed by travel and tourism at 54.1. The construction industry showed 53.8, little-changed from December’s nine-month low but still signalling growth.
However, margins of companies continued to be squeezed in January, Ms Haque said, as output prices contracted for the ninth consecutive month and employment growth was still muted, suggesting companies are still “making efforts to cut costs through curbing headcount”, she said.