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Dubai's non-oil sector continues to expand

Christian Fernsby ▼ | January 13, 2020
Business activity in Dubai's non-oil sector continued to expand in December 2019 on better growth prospects in 2020, according to the IHS Markit Dubai Purchasing Manager Index survey.
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Business in the Middle East   Dubai street
"The Dubai non-oil economy showed further signs of weakness at the end of 2019, with new order growth the slowest in nearly four years. Nevertheless, business activity continued to expand sharply, mainly because firms expect things to pick up in the year ahead. The Expo 2020 is a key feature of firms' hopes for the future, as it promises to bring a timely boost to investment and spending across Dubai," said David Owen, economist at IHS Markit.

Topics: Dubai

Strong activity is the non-oil sector is attributed to companies' preparedness for expected investment and higher sales in 2020.

Most of the studies conducted by regional and global think-tanks foresee higher growth rates for Dubai and the UAE in 2020 compared to the previous year, due to a strong influx of tourists and increased spending during the upcoming Expo 2020.

Also, the Dubai government announced an expansionary budget and higher allocation for the Expo.

Looking ahead, around 64 per cent of respondents expect business activity to grow, mainly amid hopes of market stabilisation and higher local investment as Expo 2020 approaches. Tourism numbers are also forecast to strengthen in the coming year.

However, December saw Dubai's PMI falling to a four-month low of 52.3 from 53.5 in the previous month amidst the slowest rise in new orders for nearly four years. Employment increased only marginally, but business activity remained strong as firms prepared for expected investment and higher sales in the coming year.

Firms often highlighted that softer economic conditions reduced clients' spending power.

On a sector basis, output growth accelerated among construction and travel and tourism firms. The other monitored sector, wholesale and retail, recorded the weakest expansion in output since February 2016.

In response to softer demand growth, Dubai companies extended price discounting strategies at the end of the year. Latest data signalled a solid fall in average charges, albeit one that was the least marked since September. By contrast, input costs increased for the second month running in December. The rate of inflation quickened from November amid a renewed rise in staffing costs.