Dubai’s Economy Starting to Heal, Still ‘Long Way From Recovery’

(Bloomberg) -- A gauge of business conditions in Dubai bounced back to the highest since the coronavirus pandemic dragged the economy into a downturn, even as weak demand still stands in the way of a recovery.

The IHS Markit Dubai Purchasing Managers’ Index rose to 46 in May from a record low 41.7 in April, remaining below the 50 mark that separates contraction from growth. Thanks to a relaxation of lockdown measures, output and new orders declined at a slower rate, while unemployment had the smallest drop in three months, according to a report on Tuesday.

“The latest survey data suggested economic conditions remain a long way from recovery in May,” said David Owen, economist at IHS Markit. “Activity is expected to improve in the year ahead, but it remains to be seen how long it will take for the Dubai economy to rebound following COVID-19.”

• New business in May decreased at the weakest pace in three months; fewer Dubai businesses looked to reduce staff costs
• Among the three monitored sectors, travel and tourism had the steepest contraction for the third month in a row; construction firms reported the sharpest decline in incoming new work
• While business expectations for the next 12 months inched higher in May, overall sentiment was still the second-weakest in the survey history, a signal of “only modest optimism toward a recovery in output,” according to IHS Markit

Unlike countries across the Middle East, the United Arab Emirates -- of which Dubai is a part -- is so far not seeing signs of a possible resurgence of infections. But even as more companies reopen for business, Dubai may need longer to turn around an economy still suffering from disruptions to trade and travel and facing the likelihood that many expatriate workers could start to leave.

“Businesses highlighted that, despite restrictions on economic activity being partly lifted, weak consumer demand and a slow market response stopped them from making headway into covering their losses,” Owen said.

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