Dubai economic outlook brightens with buoyant tourism, retail

Rising tourism and retail ­sectors pushed ­Dubai’s non-oil private sector to a 10-month high last month, according to the latest data from Emirates NBD.

The bank’s Economy Tracker Index, which takes a monthly reading on indicators such as new orders, employment and inventories, stood at 54.6 last month, indicating a slightly higher expansion rate than the previous month’s 54.5, although still below the trend of the past three years.

Emirates NBD said Dubai’s wholesale and retail sub-sector was the best performer, with a reading of 58.2, followed by travel and tourism at 54.1. Those two made up for a sluggish – though still expansionary – construction sector at 51.5. Any reading above 50 indicates expansion.

The pickup in the tourism sector was encouraging but Emirates NBD said that as with the broader UAE purchasing managers data released earlier this week, the rise was not accompanied by an improvement in employment.

“The recovery in the travel and tourism sector last month is particularly encouraging as this sector had been relatively soft in previous months,” said Khatija Haque, the head of Middle East and North Africa research at Emirates NBD. “However, we note that the expansion has not led to increased employment, suggesting that firms are becoming more efficient in their operations.”

The lack of hiring despite the improved business activity contrasted with rising employment numbers during the past four-and-a-half years, the bank said.

Some companies said that uncertainty about the economic outlook had led to more cautious hiring strategies, while also offering discounted prices to clients.

The report is in line with that of other forecasters who see Dubai’s – and that of the broader UAE – economy improving tentatively over the next year or so, with tourism and retail expected to outpace the rest of the economy.

Credit Suisse last week forecast that UAE’s non-oil economy would expand by 2.9 per cent this year, picking up momentum and growing by 3.7 per cent next year.

“Tourism will again be among the stronger-performing sectors,” with easing sanctions against Iran playing a part in the improvement, as well as preparations for Expo 2020 in Dubai, said Berna Bayazitoglu, an analyst at Credit Suisse. But “tourism remains vulnerable to weaker external demand, with continuing economic troubles in Russia and regional instability”.

Euromonitor, a market research company, sees tourism’s contribution rising significantly over the next few years, with inbound trips expected to increase by 39 per cent over the next four years to nearly 28 million annually and revenue from leisure arrivals increasing to Dh59 billion by 2020 from Dh42bn last year.

“A lot of growth is expected to come from Asian countries and less politically stable Arab countries, visits from friends and family, and shopping is one of the key leisure activity that tourists engage in,” said Rabia Yasmeen, a Euromonitor analyst.

The trend also is backed by a robust advertising campaigns by the Dubai government to attract visitors in the run-up to Expo 2020.

The effect on the UAE – including Dubai tourism – of the UK’s vote to leave the European Union is not yet clear. Euromonitor has not addressed the Brexit vote and the UAE specifically but it estimated that Saudi Arabia would be one of the economies hit hard by the decision.

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