Business confidence in Dubai soars on rebound in key sectors

Economic activity and outlook demonstrates stable growth and move towards sustainability

The economy of Dubai looks set to sustain its growth momentum with investor confidence on the return and increasing activity across core sectors such as trade, tourism, manufacturing and even real estate as reflected in the overall business sentiment in the emirate.

The composite Business Confidence Index for Dubai reached 135.9 points in the last quarter of 2012, a 10.8 per cent increase compared to the previous quarter and a two per cent growth from the same quarter of 2011.

Optimism was evident as 94 per cent of the businesses that participated in the quarterly business survey, conducted by the Department of Economic Development (DED) in Dubai during October-December 2012, said they expected either higher or stable sales in 2013.

Brighter business outlook has also boosted hiring prospects as 27 per cent of the businesses revealed plans to increase their workforce in the first quarter of 2013 while 71 per cent reported they would retain their current head count.

“The prevailing business sentiment in Dubai is strong evidence that economic growth in the emirate is steady and heading towards sustainability. Rising confidence in critical economic sectors and strengthening macroeconomic fundamentals are stimulating business and employment prospects in Dubai,” commented His Excellency Sami Al Qamzi, Director General of the Department of Economic Development.

The survey shows businesses across various sectors as buoyant on sales volumes, revenues and profits. While 66 per cent of the companies foresee improved sales revenue and 61 per cent predict higher profits during the first quarter of 2013, 82 per cent expect prices to remain stable, indicating that the increased revenue would come from a rise in real business activity.

Among key sectors, expectations are the highest among trading firms, followed by services and manufacturing firms. The rising optimism is on account of the anticipated demand during the Dubai Shopping Festival and hopes of getting new orders or projects. Sixty per cent of the companies also plan to increase their purchase orders in Q1 2013 to meet the rising demand.

Two-thirds of the companies in construction await new projects in the local as well as regional markets or expect to restart stalled projects. The rebound in construction-related activity is also reflected in manufacturing as cement and glass manufacturers are more optimistic.

Within the services sector sales volumes expectations are relatively higher for companies engaged in advertising, architecture, car rental and travel, which can be attributed to rising demand from new projects, expansion in new markets and the onset of the tourist season as well as the busy events calendar of Dubai.

Key business challenges reported by SMEs and large enterprises are almost similar – competition, rental/lease cost, utility charges and business regulations. Large firms are especially concerned about fees, regulations, competition and cost challenging their export orientation.

In spite of these challenges, 65 per cent of businesses plan to invest in expansion in Q1 2013, compared to 29 per cent in Q4 2012. Businesses also look more inclined to upgrade their technology as 46 per cent reported plans to invest in this area in 2013 compared to 23 per cent in the final quarter of 2012.

DED conducts the quarterly surveys to measure the perceptions of the business community and capture the business outlook for the future. The survey serves as an effective tool to measure the pulse of the business community and allow the government and the private sector to track and analyse major trends and issues that have a bearing on economic activity in Dubai.

A total of 501 companies in Dubai were covered in the survey. The companies were asked to indicate if they anticipated an ‘increase,’ ‘decrease,’ or ‘no change’ in key indicators such as sales revenues, selling prices, volumes sold, profits and number of employees.

Conducted in collaboration with the global consultancy firm Dun & Bradstreet (D&B), the quarterly survey uses a rigorous sampling approach that ensures adequate representation of small, medium, and large enterprises across the manufacturing, trading, and services sectors, while giving due attention to the perceptions of the exporting firms in Dubai.

For further information on the surveys, contact Laila Buabdulla, Head of Economic Information at DED, on +971 4 4455884.