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Companies in Dubai are feeling the economic impact due to coronavirus outbreak, while business confidence has fallen to the lowest level in more than two years, a new survey revealed.
According to IHS Markit, which tracks business conditions in the non-oil private sector, firms have been hit by weaker sales and client demand, with the travel, tourism and construction industries not faring well.
Several companies are facing increasing business challenges including replenishing stocks which has become difficult due to delays on imports from China.
Overall, the seasonally adjusted Dubai Purchasing Managers’ Index (PMI) dropped to a four-year low of 5.0 in February, from 50.6 in January.
“The headline PMI was held back by weaker sales and lower inventories at Dubai firms… Construction fared the worst of the monitored categories, recording a moderate decline in business conditions, while the travel and tourism sector stalled,” IHS Market said in its latest report.
The outbreak of the coronavirus, which has infected more than 113,000 people and spread to more than 100 countries in barely three months is sending economic shockwaves around the world, with the increasing number of flight cancellations, travel restrictions and city lockdowns hurting business revenues.
IHS Markit noted that companies in Dubai last month saw new orders dropping for the first time since February 2016, following a trend of slowing growth since last October.
Firms were also "much less optimistic" that output will grow over the next 12 months, with the degree of confidence reaching a 31-month low.
“[Companies surveyed] often related the decline to weaker client demand and unfavorable market conditions. Some also noted that travel restrictions due to the coronavirus outbreak in China led to decreased tourism,” IHS Markit said.
However, despite slowing global economic conditions, Dubai’s overall output growth remained unchanged.
Economic impact
Dubai-based companies interviewed by Zawya had said that they have been grappling with the impact of slow tourist traffic since February when the outbreak peaked in China.
“We have seen a significant year-on-year drop in sales since the beginning of [February]. I think the negative media press throughout the world on the virus is unnecessarily scaring people from everywhere, not just Asia,” Peter Papas, executive director of Food Fund International, which operates a chain of restaurants across the UAE, told Zawya.
The International Monetary Fund (IMF) had earlier said that the forecast on economic growth for countries around the world could be revised and reduced by a few percentage points due to the impact of the virus. “[The virus] is going to affect the global value chains. It is already affecting tourism and travel,” Kristalina Georgieva, IMF managing director said in February during a visit to Dubai.
According to David Owen, an economist at IHS Markit, while the latest overall economic weakness in Dubai is still mainly linked to unfavorable domestic conditions, some companies did note a negative impact from the coronavirus on tourism activity as flights have been restricted.
“With the outbreak appearing to intensify, this poses an additional challenge ahead for Dubai's economy. Firms reflected these growing concerns in their outlook for future activity, which deteriorated to the lowest in over two-and-half years,” Owen said.
(Reporiting by Cleofe Maceda; editing by Seban Scaria)
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