Businesses in Dubai foresee rising demand and higher profits in Q2 2013

Businesses in Dubai are confident of growth trends continuing to the second quarter of 2013, shows the quarterly business confidence survey conducted by the Department of Economic Development (DED). While optimism runs across the whole economy, it is particularly high among small and medium enterprises (SMEs) and exporting firms as reflected in the composite Business Confidence Index (BCI), which stood at 113 points during Q1 2013.

The survey showed that 86 per cent of the businesses are upbeat on sales and profits and 98 per cent plan either to increase (23%) or maintain (75%) their employment count during the next quarter. Overall business expectations are on an upward trend with 91 percent of firms reporting either improvement or stability in business conditions in Q2 2013.

“Economic activity in Dubai is on a firmer ground, especially with key sectors such as tourism, logistics and aviation flourishing and real estate on a recovery path. The services and retail sectors are also signalling strong growth, which reaffirms Dubai’s reputation as a resilient and vibrant economy,” commented His Excellency Sami Al Qamzi, Director General of DED.

“Rising confidence among SMEs and exporters also shows that the combined effort of the government and the private sector to achieve sustainable economic development is producing the desires outcomes,” added Al Qamzi.

The survey reveals robust expectations, with 55 per cent of businesses expecting higher sales revenues and another 30 per cent stable sales in Q2 2013. The revenue growth will continue to be driven by rising real business activity (volumes), as 80 per cent of respondents expect prices to remain largely stable. A few companies (13%) plan to raise their prices in Q2 2013 as they return to the pre-discount season price levels or renew orders at higher prices.

With respect to sales volumes, 54 per cent forecast an increase during Q2 2013 and as a result, 49 per cent of the firms are also planning to increase their purchase orders to ensure adequate stocks to meet the expected demand. In terms of sectors, manufacturing businesses are most optimistic about sales and profits whereas service firms are most upbeat about new hires.

More than half (55%) of the companies said they will invest in capacity expansion during the next 12 months. This proportion is slightly higher among larger companies. Furthermore, 40 per cent of the respondents plan to invest in upgrading technology over the same period.

The positive sales outlook is also reflected in profit estimates, with 54 per cent expecting improved profits in the next quarter, mostly from engaging in new projects or contracts, but also from margin optimisation. Within services, expectations are relatively higher for companies engaged in facilities management, education and IT & telecommunications. Key reasons reported are the traction in demand and expectations of new contracts.

Around 70 per cent of the construction companies also expect new deals from local and regional markets. Likewise, driven by increased demand from all major sectors, 59 per cent of transportation service providers see higher activity in Q2 2013. Hotels and restaurants are however less optimistic, largely due to the onset of the summer season.

Within the trading sector, auto trading, computers, food and textile firms are relatively more optimistic. Food and beverage companies expect higher demand during the summer while textile traders are anticipating higher exports. Among manufacturing firms, those engaged in chemicals, glass & ceramics, machinery & equipment, paper and plastics have a better outlook.

In terms of the business environment, the survey showed that 21 per cent of firms expect no challenges impacting their operations (32% in Q1 2013), indicating a high level of satisfaction in doing business in Dubai. For the remaining respondents, the top most challenge reported in the current quarter is increasing competition, which nevertheless should stimulate efficiency and innovation. Other challenges, as perceived by respondents, are the levels of government fees, increasing rental cost and cumbersome business regulations.

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 512 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.

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