Dubai has been showing signs of improvement, amidst all the havoc the pandemic has created. The IHS Markit Dubai Purchasing Manager’s Index survey report shows that the non-oil economy has witnessed a modest expansion for the first time in the last three months. The index is derived from the individual diffusion indices that measure changes in output, new orders, employment, suppliers’ delivery time, and stocks of purchased goods; these have rose to 50.0 from 49.0 (as of November).
The survey that covers the Dubai non-oil private sector economy claims that the month of December showed weak cost pressures in the field of travel and tourism, wholesale, retail, and construction. A fall in the selling price is yet to come, though at a slower rate.
Analysts are of the opinion that, Dubai is the most benefited with the reopening of air, land, and sea border with Qatar after a long gap of three and a half years. This will pave the way for cross-border trade, re-exports, aviation, hospitality, and tourism.
David Owen, the economist at IHS Markit, said the new order and increase in outputs has been favorable to the non-oil economy of Dubai but the 51.0 index signals only a slight expansion in the Emirate; the unemployment rates are still high and the lower stocks purchase and shorter delivery times show the struggling stage of the Emirate.
“Looking ahead, firms continued to present a highly subdued outlook for business activity in December, despite some confidence that the confirmed effectiveness of Covid-19 vaccines should help a global economic recovery in 2021. Businesses noted that the after-effects of the pandemic will continue to be felt across the non-oil sector, particularly as hiring remains weak and containment measures continue to stem export demand,” Owen commented.
According to the forecast by the Dubai Economy, before the reopening of the borders with Qatar, the economy will witness a 4% growth due to the policy measure introduced by the government to contain the effects of the pandemic.
The economy had a downfall of 10.8% during the mid of the past year, but with the sudden recovery measures offered by the government, it is expected to be at 6.2% by the end of the year.
The initiatives that are yet to come and the Expo 2020 that is scheduled to take place in 2021 will hopefully bring in more employment opportunities in the coming years. “Dubai is a bright example of an economy that has succeeded in protecting lives and securing livelihoods by limiting the impact of the Covid-19 pandemic,” said Sami Al Qamzi, director-general of Dubai Economy.
The improvement in PMI in December was brought in by the sharp rise in business activity during that month after the non-oil firms in Dubai reduced the output midway through the final quarter of 2020. This was the quickest rise in expansion in the past year.
Even though the final quarter saw a rise in business activity and output in many different sectors, the client demand failed to promote the hiring activity. Ever since November, the job shedding scale has also been on the rise. One other trend was that the companies in Dubai continued to reduce their inventories of input, but the diminishing rate remained modest.