Dubai economy shows vulnerability

09 February 2016

Falling oil prices and global uncertainty activated brakes on new business growth

Dubai’s private sector economic index fell to its lowest level since February 2010, reaching 50.7 in January, which is barely above the 50.0 no-change mark.

The index measures changes in output, new orders, employment, suppliers’ delivery times and stocks of purchased goods across Dubai’s construction, travel and tourism, and wholesale and retail sectors.

The weak expansion level in January, according to Khatija Haque, head of MENA Research at Emirates NBD, shows that “the services sectors are continuing to face challenging market conditions at the start of the year, while the construction sector activity has slowed sharply”.

The Dubai Shopping Festival is understood to have boosted the wholesale and retail sector activity, making it the best performing sector in January. The construction sector, usually the best performing of the three, experienced a deterioration in operating conditions due to an outright fall in output levels, which are linked to delays in new projects amid weaker confidence among clients, the Emirates NBD Economy Tracker report said.

A moderate increase in new orders was seen in January although the rate of expansion was the weakest in nearly six years. Survey respondents are understood to have suggested that falling oil prices and the global economic uncertainty had led to “subdued confidence among clients,” which had in turn activated the brakes on new business growth.

In terms of outlook, the Emirates NBD report noted a weaker level of optimism among the construction and travel & tourism firms compared to an improvement in growth expectations across the wholesale and retail sector.

 

 

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