DUBAI, Aug 17 (Reuters) - Dubai's economy is expected tocontract 5.2% this year from the impact of the coronaviruspandemic but the Middle East trade and tourism hub could seegrowth rebound to 4.3% next year, Japan's MUFG said.

While vital economic sectors of the emirate have been dealta severe blow by the global health crisis, high-frequencyindicators signal a normalisation in economic activity, the banksaid in a report.

Also, the seasonally adjusted IHS Markit Dubai PurchasingManagers' Index (PMI) increased to 51.7 in July from 50.0 inJune, the highest reading since December last year, signallingimproved business conditions.

"Dubai has been most vulnerable to the coronacrisis thanother regional economies, with more than a third of the economy wholesale and retail trade, transportation, recreation andhospitality explicitly susceptible to physical distancing andtravel restrictions," said Eshan Khoman, head of MENA researchand strategy at MUFG.

But he said the wealth of the United Arab Emirates federalgovernment protected it from the crisis and Dubai's diversifiedeconomy positioned it for a rapid recovery.

"On net, we see Dubai's economy contracting 5.2% in 2020,though next year's recovery will be robust at 4.3% as externaldemand recovers and the delayed Dubai Expo attracts a likelylarge influx of tourism inflows," he said.

Dubai was poised for a boost in income and economic activityfrom hosting the expo this year but the event has been postponedby a year because of the pandemic.

(Reporting by Davide Barbuscia; Editing by Jacqueline Wong) ((Davide.Barbuscia@thomsonreuters.com; +971522604297; ReutersMessaging: davide.barbuscia.reuters.com@reuters.net))