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Stability boosts business outlook in Dubai: Survey

Firms optimistic as prospects for hiring and expansion brighten.

Stability and optimism seem to be the overarching sentiment among businesses in Dubai as almost all of them look forward to stable outcomes while also planning to hire and upgrade capacity in days to come, according to a survey.

The quarterly business confidence survey, conducted by the Department of Economic Development (DED) from October to December 2013, said about 97 per cent businesses expect sales to increase or remain steady in first quarter of 2014 while 63 per cent foreseeing better business conditions this year. A total of 502 companies in Dubai were covered in the survey.

Reflecting a steady build-up in positive estimates the composite Business Confidence Index for the final quarter of 2013 rose to 144.3 points, up 8.4 points from the same period of 2012 and the 141.6 points recorded in the previous quarter. The overall business outlook for the first quarter of 2014 also improved with 63 per cent businesses foreseeing better business conditions as against 58 per cent for fourth quarter of 2013.

Overall outlook on sales continues to improve, with 97 per cent businesses expecting either an increase or no change in sales volume in the next quarter, compared to 96 per cent in the last quarter and 94 per cent in Q4 2012. As 71 per cent see no change in selling prices in Q1 2014, sales revenue estimates are evidently driven by higher sales volume expectations.

Consistent with the positive expectations on sales, 64 per cent businesses are also planning to increase their new purchase orders in the next quarter, based on positive expectations of new project wins/increase in demand for products and services. For 33 per cent of businesses current stocks and purchase orders from the previous quarter are adequate to meet demand.

Profitability estimates are also in line with the overall sales expectations, as 62 per cent see stronger net profits based on anticipated demand and improved margins. Like in the previous two quarters, larger firms look more confident than their smaller counterparts as their index score is 151 compared to 134.3 for the small and medium enterprise (SME) segment. The high confidence among larger firms stems from their brighter outlook on selling prices and hiring.

Manufacturing leads

Among the key sectors, manufacturing companies (71 per cent) are more optimistic with respect to sales volume and purchase orders, while service firms are more optimistic on selling prices, hiring and profits. Among services companies 67 per cent expect increased sales volumes while the corresponding share among trading firms is 59 per cent.

The steady rebound in the real estate sector and growing anticipation of new projects, especially following the Expo 2020 announcement, has resulted in rising optimism among architecture and real estate while 88 per cent of restaurants and hotels also foresee stronger outcomes from tourist influx during January–March 2014.

Driven by increased demand from all major sectors during this period, 64 per cent of the transportation companies also foresee more contracts in the coming quarter.

A comparison between exporters and the overall business community in Dubai shows that exporters are less optimistic (134.1) as compared to the overall businesses (144.3), primarily on account of lower optimism on selling prices.

On hiring, the year-on-year prospects as well as the quarter-on-quarter outlook has improved for first quarter of 2014 with 39 per cent businesses expecting to increase their employee count compared to 27 per cent in Q1 2013 and 26 per cent in Q4 2013. Service and manufacturing firms are more optimistic with respect to hiring compared to trading companies.

Majority (64 per cent) of the respondents cited no business challenges impacting their operations, thus reaffirming the ease of doing business in Dubai. For the remaining, the primary challenge is competition from local and international market players while increasing rentals and leasing as well as government fees & regulations also featured in the list.

Businesses are also buoyant on investing in upgrading capacity and technology linked to their operations. A significant number (77 per cent) intend to invest in capacity expansion in Q1 2014 compared to 72 per cent in the previous quarter. Similarly, those planning technology upgrades have increased to 66 per cent in Q1 2014 from 60 per cent in the previous quarter.

— business@khaleejtimes.com