Dubai Businesses Return to Growth First Time Since Virus Struck

Dubai’s non-oil economy expanded in July for the first time since its downturn began.

Abeer Abu Omar

12 Aug 2020, 04:50 PM IST

Dubai Businesses Return to Growth First Time Since Virus Struck

The Burj Khalifa skyscraper, center, stands above other skyscrapers on the city skyline in Dubai. (Photographer: Christopher Pike/Bloomberg)

(Bloomberg) -- Dubai’s non-oil economy expanded in July for the first time since its downturn began when the coronavirus pandemic upended travel and commerce.

Accompanying the improvement, however, were continuing job losses and a weaker outlook among businesses, according to IHS Markit. Its Dubai Purchasing Managers’ Index rose to 51.7 last month, climbing from June’s mark of 50 that separates growth from contraction.

“July PMI data for the Dubai non-oil private sector signaled the start of a post-Covid-19 recovery,” David Owen, economist at IHS Markit, said in a report Tuesday.

Businesses in Dubai are benefiting from the lifting of lockdown restrictions, with foreign visitors allowed to enter the Middle East’s commercial hub from July 7. The United Arab Emirates, of which Dubai is a part, has kept contagion in check after easing many of the measures imposed to stop the disease.

IHS Markit said the survey panel pointed to a pickup in consumer demand as restrictions came down. Companies also saw additional sales as international flights began to operate again and tourist venues reopened.

Gains in output and new work were largely behind the first expansion in the non-oil economy in five months
- The rate of output growth was the quickest so far in 2020
Construction as well as the wholesale and retail industry are leading the upswing
- Travel and tourism had their first rise in activity since February despite lagging behind in terms of output growth
Inventories rose at the strongest rate since last December

But the labor market and corporate sentiment painted a less upbeat picture as firms still look to cut back on costs. Employment fell for a fifth consecutive month in July.

Optimism that activity will rise in the next 12 months weakened for the first time since April, with IHS Markit finding a wider disparity among businesses over whether they expect to recover output by next summer.

“With margins tight and sales still at relatively weak levels, firms continued to shed jobs in order to cut back on staffing costs,” Owen said. “The rate of reduction did slow from June though.”