Dubai's non-oil private sector economy returns to expansion as restrictions ease

Dubai's non-oil private sector economy expanded for the first time in five months in July. Chris Whiteoak / The National

Dubai's non-oil private sector economy expanded for the first time in five months in July, marking the beginning of a post Covid-19 pandemic recovery as the number of infections continue to decline and the emirate eases restrictions on businesses.

The seasonally adjusted IHS Markit Purchasing Managers' Index reading for Dubai rose to 51.7 in July from the neutral 50-threshold in June. A reading above the 50-mark is an indicator of economic expansion while anything below points to a contraction.

"July PMI data for the Dubai non-oil private sector signalled the start of a post-Covid-19 recovery ... [and was] driven by stronger expansions of activity," David Owen, an economist at IHS Markit, said. "Companies responded by raising purchases solidly and at the fastest rate in seven months."

Improved business conditions were largely driven by a solid increase in new work received by Dubai companies in July. New work increased at the fastest rate since November.

Consumer demand continued to pick up as the government further eased restrictions put in place to curb the virus. The reopening of tourist destinations and the resumption of international flights in particular helped generate additional sales, according to the survey.

Dubai's economy has faced headwinds in the past few months as a number of industries including tourism, trade and real estate slowed after the government restricted movement of people to curb the spread of Covid-19.

The emirate, however, has launched several measures to help businesses recover from the pandemic-driven economic slowdown. Last month, it announced a further Dh1.5 billion worth of economic stimulus package, bringing the total support given to businesses to Dh6.3bn.

The uplift in business activity in July was broad-based across the monitored sectors, led by construction and wholesale & retail. Travel and tourism lagged behind in terms of output growth, but recorded the first rise in activity in five months amid government efforts to restart tourism.

Dubai, a main trading and financial hub in the Arab world, opened its doors to international visitors on July 7 and expects its tourism industry to rebound this year as other countries begin to ease travel restrictions, Helal Al Marri, director general of the Dubai Department of Tourism and Commerce Marketing said last month.

On Monday, DTCM said it is seeing "green shoots" of revival in its tourism and hospitality industry after the emirate opened its doors to international visitors. Jumeirah hotels said its online bookings doubled in the week after the re-opening to tourists compared to the previous week. Its properties registered an average daily increase of 109 per cent in booked room nights.

Dubai businesses also reported a healthy expansion in output at the start of the third quarter, with the rate of growth quicker than that seen in June, and the best recorded in 2020 so far. Firms also received new projects and increased their marketing activity, according to IHS Markit survey.

July data signalled a fifth successive fall in employment, although Job losses eased back from June. Despite the upturn in sales, many firms said they lowered total costs to ease pressure on margins, while others said cash flow was still weak to maintain current workforce numbers.