Dubai's business conditions at 18-month high, edging closer to pre-Covid level

Sentiment is up on a sharp rise in output and new business, which pushed the Dubai PMI index higher

Art installation on Marina Walk in Dubai. Business conditions have improved to the highest level since November 2019. Chris Whiteoak / The National

Business activity in Dubai’s non-oil private sector economy continued to improve in April, reaching a one and half-year high, boosted by a sharp rise in output and new business as the emirate pushes its Covid-19 inoculation programme at pace.

The seasonally adjusted IHS Markit Dubai Purchasing Managers' Index rose to 53.5 in April from 51 in March, the highest level since November 2019, suggesting the economy is moving closer to its pre-Covid growth trajectory.

A reading above 50 indicates economic expansion while one below points to a contraction.

The largest growth contributor at the beginning of the second quarter was the increase in new orders, which pointed to the quickest rise in customer sales for a year-and-a-half.

Growth in the travel and tourism sector was also a driver of the upturn in April, with companies reporting the first rise in new business this year. It was the strongest rate of growth for the sector since the end of 2019, according to the survey.

Other key areas of Dubai economy such as construction, wholesale and retail sectors also saw improvement, with the pace of new work picking up in April.

"Travel and tourism firms recorded the most notable bounce in performance, amid increasing hopes of a rise in tourism activity later in the year, boosted by the rapid vaccine roll-out," David Owen, an IHS Markit economist, said.

The rise in output and new orders underpinned the return to pre-pandemic trends as "business confidence [has] strengthened to the highest [level] in over a year", he said.

The fourth consecutive uptick in Dubai's non-oil private sector economy was supported by optimism about the coming year as the impact of the pandemic on the economy is expected to recede further with Dubai and other emirates continuing their push for mass inoculation against Covid-19.

Globally more than 1.29 billion doses have been administered across 174 countries. The UAE has administered more than 11.1 million vaccines, enough to cover about 52 per cent of the country's population, according to Bloomberg's vaccine tracker.

The daily infection rate in the UAE is also on the decline as opposed to parts of Europe, the Americas and India where second or third waves of infections have resulted in fresh lockdowns.

Widespread testing and tracing and a high vaccination rate have been credited for bringing down daily infections in the UAE, which has boosted business confidence. The country recorded 1,572 new Covid cases on Sunday, a significant drop from nearly 4,000 reported earlier in the year.

Dubai, the commercial and the tourism hub of the Middle East, has so far unveiled stimulus packages worth Dh7.1 billion ($1.93bn) to soften the impact of the pandemic on the economy and support businesses and individuals. The emirate’s economy is forecast to expand 4 per cent in 2021, according to government projections released in December.

The latest PMI survey showed that non-oil private sector companies also raised output for the fifth consecutive month in April, with the rate of expansion quickening to its highest since July 2020.

Staffing levels also improved in April, a third increase in employment number in four months, as companies look to boost capacity as demand improves.