Dubai: Businesses in Dubai are confident of closing the year on improved revenues and a stronger footing with economic growth expected to gain momentum during the months ahead.
The quarterly business survey of Dubai Economy showed that the Composite Business Confidence Index (BCI) of local businesses increased 14.9 points and reached 129.8 points in the third quarter of 2019, from 114.9 points in the second quarter.
The Composite BCI for Q3 2019 has also gone up 11.3 points to 129.8 from 118.5 in the same quarter of the previous year, reflecting a remarkable improvement in the business environment and future outlook. On an annual basis, businesses are more upbeat about hiring, sales revenue and volumes on account of an expected improvement in business conditions, new projects, increased marketing activity, and optimism surrounding the upcoming Expo 2020.
Optimism amongst businesses in Dubai
Ali Ibrahim, Deputy Director General, Dubai Economy, said the latest survey points to optimism among businesses across all sectors. “The measures initiated under the directives of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, to reduce cost of doing business and strengthen Dubai as one of the best investment destinations have contributed to the increasing optimism. Looking ahead, we see the momentum building up, notably with the countdown to Expo 2020 Dubai, which will further strengthen investor confidence in Dubai.”
Ibrahim added: “The survey findings appear to be in line with global indices and estimates, the most recent of which was the Global Competitiveness Report 2019 of the World Economic Forum ranking the UAE as first in the Arab world and 25th globally. The UAE moved two spots up from the 2018 ranking while being rated number one in macroeconomic stability and second in ICT adoption among 141 economies.”
The projection for volumes has also displayed a consistent year-on-year and quarter-on-quarter increase, with net balance increasing from 34% for Q4 2018 and 31% for Q3 2019 to 54% for Q4 2019, supported by expectations of improvement in business conditions and demand ahead of Expo 2020. As such, more than 55% of firms in both services and manufacturing sectors expect an increase in volumes in the coming quarter. A stronger forecast for volumes has resulted in a more optimistic outlook for profits.
Large companies continue to maintain stronger projections as compared to SMEs with Composite BCI scores of 135.6 and 121.1 points, respectively. Large companies are more optimistic than SMEs about their outlook for selling prices, volumes, hiring, profits, and new purchase orders.
The services sector is more confident about its business prospects for parameters like wage levels, sales revenue, volumes, profits, and hiring as compared to manufacturing and trading sectors, with the travel & hospitality segment (hotels & restaurants, travel, and car rentals) being the most optimistic about volumes for Q4 2019, registering a net balance of 78%, supported by expectations of a higher number of tourists.
The manufacturing sector has displayed a stronger forecast for volumes with net balance increasing from 27% for Q4 2018 and 25% for Q3 2019 to 57% for Q4 2019. Sentiments within manufacturing firms have improved, supported by expectations of rising in seasonal demand.
The Composite BCI for exporters also displayed a year-on-year and quarter-on-quarter increase of 7.2 points and 2.9 points to 118.8 in Q3 2019 as compared to 111.6 in Q3 2018 and 115.9 in Q2 2019, respectively. Within the trading sector, computer and food & beverages segments are most optimistic about volumes for Q4 2019.
Delay in payments remains the primary challenge, as cited by 43% of firms, followed by competition (34%) and insufficient demand (17%). 13% of firms did not face any hurdles in their business operations.
Hiring intentions have also improved on a year-on-year and quarter-on-quarter basis, with net balance increasing from 7% for Q4 2018 and 12% for Q3, 2019 to 14% for Q4 2019. The increase is mainly attributable to the expected rise in hiring in manufacturing and services sectors. Those foreseeing an improvement in business situation increased from 46% for Q3 2019 to 58% for Q4 2019, while the proportion of those expecting stability dropped from 43% to 37% during the same period.
Through the quarterly business survey, Dubai Economy seeks to gauge the perceptions of the business community. The overall scoring system is calculated by factoring in the weighted contribution of SMEs and large firms to Dubai’s overall GDP. The survey serves as an effective tool for measuring the pulse of the business community, whereby public and private sector participants can track and analyse major trends and issues regarding businesses in Dubai.