Why Businesses in Dubai are Seeing Exponential Growth

Business conditions have improved at one of the fastest paces in over a year, which is partially because of new work cropping up and because of Eid. According to a survey from Emirates NBD, the activity in retail in Dubai had become the best performing sector for the economy, and there was even improvement to the business activity that made up for the depressing lows of February.

Other Reasons for the Growth

Looking at the bank's Economy Tracker Index, something that surveyed the sector for the non-oil private business in emirate about employment, new orders and inventories, they discovered that the business conditions in Dubai had improved at their fastest rate since March of last year. Examining the seasonally adjusted index, they found that it increased to 55.9 which is up from June's 54.6. Whenever you see a figure above 50, that is a positive sign that shows business has been expanding in the country. Meanwhile, if you see anything below 50, it shows that the business sector is in contraction. Adding the findings and tally with the results of UAE's Purchasing Manager's Index, they found that entire economic growth in the country had risen to a 10-month high. A large reason for the latest growth relates to stronger and newer work being found and the output growth. Khatija Haque, the top research expert for Emirates NBD said that the retail and wholesale sector had probably seen huge benefits from the holiday of Eid taking place.

Growth in the Private Sector?

Researchers reviewed the data, and they found that the private sector had received new orders, which were expanding this area at one of the fastest rates since the past year in March. Looking at the results, wholesale and retail trade performed the best, and they had a recorded index of around 57.3. Despite those promising statistics, however, each of the following months have since been lower. For example, Emirates NBD reported that their latest reading was now back and above the survey's average 55.1. You have to take the growth with a grain of salt because with the UAE's economic slowdown because of lower oil prices, you have to understand that the economy of Dubai is still in a fragile state. According to the IMF, the economic growth of Dubai could slow down to around 3.3 percent this year, which is still better than 3.5 percent from the prior year.

Where Dubai is Strong

What makes Dubai a little stronger than some of the other oil-rich economies in the region is that the Dubai government only receives a fraction of their revenues from oil. They rely on other areas like tourism and trade that comes from Saudi Arabia and Abu Dhabi. Still, the latest findings show a lot of promise for Dubai because it could be thriving economic times ahead for this country that has normally had to slog through the traditionally slower summer season. After reviewing a new survey, the third quarter of 2016 could be a positive start for the private sector economies.

Incoming New Business

The big reasons for the upturn in growth relates to how a lot of incoming new business has started to settle in the region. When looking at the economy tracker, Dubai has been in recovery since they hit one of their lowest levels in six years during the month of February. The country's index dropped to 48.9 in February when it was at 50.7 before toward the beginning of 2016. This collection of data first started in 2010. Construction has also been a huge area of growth for Dubai with a growth index of 53.5.

Optimism for the Coming Year

When looking at the survey, another interesting finding is how many companies have chosen to keep positive and confident outlook for the business sector in the coming year for three of the key sub-sectors. Part of the expansion in business activity came from moderate job creation that took place in the private sector of emirates. That increase in payroll numbers was the fastest rate since there was a boom in the travel and tourism companies in November of 2015.

Construction a Booming Business in Dubai

Since first moving into Q3, construction has proven one of the best performers in the sector. As a result, it has ranked as one out of the three leading sectors for the economy of Dubai. In fact, construction has done so well in Dubai that it has improved at one of the fastest rates since back in March of 2015. Despite a disheartening fall in February, what we have seen is a consistently high level of business performance for the fifth consecutive month.

Rapid Acceleration

According to the International Monetary Fund, the economic growth of Dubai could soon enter into a period of rapid acceleration, which will be far ahead of Expo 2020. This could be due to the stability of the emirates and the pickup of oil prices. The annual growth in this area could reach in excess of five percent. Zeine Zeidane, the IMF's mission chief of the UAE, gave an interview of Dubai that said on Monday that their economy will expand 3.3 percent this year. At one point it had reached 3.5 percent, but there was a construction slowdown.

The Diversified Economy of Dubai

Dubai has a diversified economy that has helped protect it from the negative impact of lower oil prices that other regional exporters have experienced. Another thing that might be helping it is that Dubai has become a safe haven for a region that is known for having conflict. In addition, a strong performance from some of its trading partners like India have helped to support the economy. Looking at some of its neighbors, the IMF predicts that Abu Dhabi could see slower growth by up to 1.5 percent in the coming year, which is down fro 4.3 percent in 2015. Meanwhile the UAE is expected to expand by up to 2.3 percent.

The Input Costs and Average Prices Charged

Across the private sector in March, the input prices were mostly stable. When it came to the retail and whole and construction firms, they recorded input price pressures. Meanwhile, the tourism industry reported that they had seen an overall reduction in their overhead costs. The prices that private sectors in Dubai charged were dropped for the third month in a row. Some people have linked this to a discounting strategy and efforts to bring in more business volume. According to the Department of Economic Development of Dubai, there was a significant increase in the amount of transactions that were related to business licenses and the number of licenses that were issued for 2016. In Q2 of 2016, there were 45,295 licenses that were renewed. During that same period in 2015, 29,575 were renewed, which shows how much growth has taken place. That is a 53 percent growth rate. Another interesting statistic is how with every three companies that exited the Dubai market, there were another 10 companies that were entering the stream. The one area that has been noted, however, is that there has been a softer development in the new work that is available.

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