Dubai’s economy, primarily driven by the non-oil private sector, is proving its resilience in the face of persistent global economic challenges and regional geopolitical uncertainties with strong signs of revival. The latest Dubai Purchasing Managers’ Index (PMI), an indicator of the performance of the non-oil private sector, shows that the economy picked up pace in September, posting a PMI reading of 52.6 compared with 51.7 in August, reflecting an improvement in business conditions. The data brings cheer as it comes during a tough external environment wrought by the US-China trade war and escalating regional tensions due to the Yemen war and the trade disruption with Iran, which have contributed to a slowdown.
Weakness in wholesale and retail trade and construction sectors was exacerbated by a sustained appreciation of the dirham in real effective terms (because of the dollar peg), stifling growth in key sectors such as real estate, trade and tourism. Renewed monetary easing and the consequent low-interest rate is likely to spur loan growth and apply downward pressure on dirham, making the dirham-denominated sectors more competitive.
The latest economic data, too, points to an economic revival. Last week, global credit rating agency Standard & Poor’s said Dubai economy is expected to grow 2.4 per cent in 2019, higher than last year on the back of increased economic activity associated with Expo 2020.
While the Expo is a major source of optimism, the recent successful trade exhibitions such as the Cityscape, Gitex Shopper and Gitex Technology Week point to enhanced business confidence.
Dubai has been spending heavily on infrastructure as part of the Expo preparations. S&P forecasts Dubai’s economy to expand at an average of 2.5 per cent annually over the 2019-2022 period with trade and transportation also contributing to the growth.
In the real estate sector, the deal flow continues to be active in Dubai’s residential space. Investors/end-users are picking up units, many of them convinced that values are now close to the bottom and hence a good time to purchase. The sub-Dh1 million homes continue to generate the maximum demand, despite concerns of a looming oversupply.
While the Expo is a major source of optimism, the recent successful trade exhibitions such as the Cityscape, Gitex Shopper and Gitex Technology Week point to enhanced business confidence, while upcoming events such as the Dubai Airshow and Motor Show are expected to give further fillip to the growth outlook.
Dubai’s strategy for a diversified and knowledge-based growth hinges on tapping foreign direct investment and expanding non-bank and capital market financing options for small and medium enterprises. And that is certain to promote private sector growth.