Dubai's business conditions to improve further in Q4 2021: Emirates NBD

Expo 2020, further easing of COVID-19 restrictions to boost economic activity

Expo 2020 Dubai. Image courtesy WAM

Expo 2020 Dubai. Image courtesy WAM

Business conditions in Dubai’s private sector are set to improve further before the end of the year on the back of relaxed containment measures and hosting of Expo 2020, Khatija Haque, head of research and chief economist of Emirates NBD said on Thursday. 

Dubai’s Purchasing Managers’ Index (PMI) inched up from 53.2 in July to 53.3 in August, as business activity grew at the fastest rate since September 2019, according to IHS Markit. Overall new employment, as well as input costs, also increased. 

Commenting on the latest PMI, Haque said business conditions have indeed improved in August, adding that further improvements are expected in the coming months, when Dubai will be hosting the Expo 2020, a six-month global event that is forecast to draw around 30,000 visitors each month. 

“We remain optimistic that private sector business conditions will improve further in Q4 2021 as Expo 2020 gets underway and the recent further easing of travel restrictions boosts visitor numbers during the high season for the travel and tourism sector,” Haque wrote in a note. 

New employment growth still modest 

A closer look at the latest PMI, however, would show that despite a strong rise in business activity, new employment growth in sectors like the wholesale and retail was slower last month. The margins in the sector also remained under pressure from rising input costs and lower prices charged, Haque noted. 

The same is true for the construction sector, whose index rose to 53.3 in August, the highest reading since July 2019. 

“Business activity grew at the fastest pace in over a year, but new work growth was more modest. The surge in activity last month may have been due to efforts to complete projects ahead of the start of Expo 2020 in October,” she said. 

Travel and tourism 

Within the travel and tourism sector, which was the best performer last month, Haque said employment growth was still the “softest in three months”. 

The index for the sector rose to a 21-month high of 55.1 in August due to a sharp increase in business activity and increase in employment levels. Companies in the sector have attributed the improvement to the easing of travel restrictions, allowing the influx of more tourists. 

(Reporting by Cleofe Maceda; editing by Seban Scaria) 

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