Business Confidence in Dubai Continues to Rise

Economic conditions in Dubai during Q1 2018 have improved over Q1 and Q4, 2017, according to a business confidence survey conducted by the Department of Economic Development (DED), Dubai.

The survey indicates that the Composite Business Confidence Index has improved by 5.5 points after registering 116.7 points in Q1 2018 as compared to 111.2 points during the same quarter of 2017.

Furthermore, the outlook for Q2 2018 appears to be even more promising as businesses are anticipating better outcomes on revenues, sales volumes, profits and new orders.

The brighter global economic prospects, coupled with strengthening oil prices and improvement in global trade are supplementing Dubai’s continued investment in infrastructure, diversification, and economic transformation to a knowledge-based economy.

These developments have translated into better returns on investment and are contributing to an expected pickup in growth from 2.8 percent in 2017 in real terms to an anticipated 3.5 percent in 2018.

Looking ahead, the continued drive to meet Expo 2020 infrastructure needs, the easing of the fiscal adjustment in the Emirate, and the recent announcements by His Highness Sheikh Mohammed bin Rashid Al Maktoum, the Vice President, Prime Minister and Ruler of Dubai, of a freeze in government fees for the next three years, and new measures to boost investment and cut cost of doing business are all adding to the upbeat business sentiments.

Emirate-wide, the outlooks across all the indicators have improved. For example, sentiments on sales revenues have increased from 26 percent for Q1 2018 to 37 percent in Q2 2018, and 35 percent of respondents expect higher sales volumes, up from 22 percent for Q1 2018.

At the sector level, the trade sector appears to be the most confident about their business prospects in terms of revenues, selling prices, profits and new purchase orders. The services sector is the most optimistic about its hiring expectations. Within the trading sector, auto traders are optimistic of higher volumes during Q2 2018 with a net balance of 75 percent based on higher demand. Exporters are more upbeat than domestic market-oriented firms across all the parameters in the Survey.

Half of the survey respondents expect the business situation to improve in Q2, 2018 compared to 41 percent in the previous quarter. While 40 percent of the respondents expect more stable conditions, the survey also indicates that 49 percent of the respondents do not expect any negative factors to impact their business operations. Competition remains the topmost challenge for firms operating in Dubai, as cited by 19 percent of the respondents.

Plans to expand capacity and upgrade technology have also improved. Over the quarter, respondents were upbeat about their capacity expansion plans with 71% planning to do so in Q1, 2018 versus 69 percent in Q4 2017 and 61% in Q1 2017. A total of 68 percent of the respondents are gearing up to upgrade technology in Q1 2018 versus 69 percent in Q4 2017 and 65 percent in Q1 2017.

DED conducts the quarterly survey to capture the outlook of companies in the emirate so that government authorities and the private sector can track and analyse major business trends and issues. The survey for Q1 2018 was conducted taking a sample of 502 companies across Dubai and they were asked to indicate if they anticipated an ‘increase’, ‘decrease’ or ‘no change’ on key outlook indicators, including sales revenues, selling prices, volumes sold, profits and number of employees.

A scientific sampling approach ensured an adequate representation of small, medium and large enterprises and covered the Manufacturing, Trading and Services sectors. In addition, the sample also included export oriented businesses in Dubai to capture perceptions of the exporting community.