April figures show softening growth
- Non-oil private sector growth slows in Dubai
- Analysts emphasise that growth is still positive
- Factors causing softening growth include strong dollar and lower oil prices
Dubais non-oil private sector showed slower growth in April, according to UK-based analysts Markits new Dubai monthly economy tracker.
Construction was the best-performing sector, while growth in tourism slowed significantly, according to its purchasing managers index (PMI).
The increase in new business in April was the smallest in three years, meaning prices became more competitive and hiring slowed slightly.
Only the retail and wholesale sectors saw continued strong growth in new business.
But the reports figures remain broadly positive.
In isolation they show robust growth, says Luke Thompson, managing director for economics at Markit. But it has fallen back from the extremely elevated levels at the start of the year.
The market began softening in March due to a number of factors, according to Timothy Fox, head of research and chief economist for global markets and treasury at Dubai-based bank Emirates NBD.
Both the strong dollar and lower oil prices are having an effect, says Fox. But with oil prices, it is mainly about confidence and the knock-on effect on consumer sentiment. Money supply is holding up well.
However, the strong dollar is affecting the real estate and tourism industries as demand from abroad slows.
In the hospitality sector, room rates have dropped to maintain high occupancy levels, leading to lower yields.
Markits bimonthly real estate tracker shows that investor inquiries from overseas have dropped. This is expected to depress rental and sales prices over the next few months.
Contrary to earlier reports, the tracker showed a modest rise in property values, especially for apartments and rental rates, although the sales value of villas fell slightly. This trend is expected to continue due to high prices.
Future economic outlooks for Dubai are mixed. The fundamentals are sound and new business growth is strong, says Thompson. At the moment, the picture is still healthy, but if growth declined further in the coming months that would be more worrying.
External factors may also have a significant impact.
Certain aspects of the regional economy are slowing due to oil prices, but PMIs are holding up in Dubai and other areas, says Fox. A global economic recovery and a recovery in oil prices, which we are starting to see, would support this. But the US could also tighten its monetary policy, although this has been postponed. The slowdown is small, not acute.
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