Dubai’s private-sector economy grew at its slowest rate for more than five years last month, according to a survey by Emirates NBD, in the latest sign of the impact of lower oil prices on the UAE’s real economy.
The bank’s Dubai Business Activity Index score fell to 51.4, its lowest level in 68 months, down from 56 in September, with the key segments of tourism, construction, and retail and wholesale falling behind in growth compared with the previous month.
Dubai’s score remains above the neutral level of 50, suggesting that its economy is still growing modestly.
However, growth in new orders across the emirate registered its second-weakest rate of expansion since December 2010, resulting in firms raising staff numbers at the weakest rate in nearly four years.
The survey’s release comes a week after the UAE’s purchasing managers’ index dropped to 54.0 for last month, its lowest level since March 2013, another sign of the low oil price’s effects on the non-oil economy.
“We expect growth in Dubai to remain positive given its strong fundamentals,” said Daniel Kaye, the lead economist for the Middle East at Oxford Economics.
“But the start of the Fed’s rate hiking cycle will present a risk for capital flow into emerging markets, more generally.”
Better-than-expected US payroll data for last month, which released on Friday, has fuelled speculation that the Fed will begin raising rates from next month.
Dubai’s key travel and tourism sector contracted in October, according to the Emirates NBD survey, falling to 49 from 52 the previous month.
However, the tourism indicator is expected to return to positive territory in the coming months as Dubai heads into the winter high-season, according to Khatija Haque, Emirates NBD’s head of Mena research.
The emirate’s construction sector and wholesale and retail subsector also slowed last month but remained in positive territory, scoring 56.1 and 52.8, respectively.
“The construction sector survey data is encouraging, as it signals relatively robust growth in new orders and output in October, despite heightened concerns about government spending in the face of sustained low oil prices,” said Ms Haque.
The UAE’s economy as a whole is expected to grow 3.5 per cent this year, according to comments last month from the Minister of the Economy, Sultan Al Mansouri.
“With oil prices remaining around the US$55 mark, economic growth will be mainly driven by the non-oil sector, which is expected to grow by 4.5 per cent this year,” said Alp Eke, a senior economist at National Bank of Abu Dhabi.
jeverington@thenational.ae
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