Dubai’s economic indicators point to a strong recovery

Key economic indicators are pointing to a strong and sustained post-COVID recovery taking shape in Dubai.

The latest set of data for Dubai’s consumer confidence shows it is the highest in six years. The first quarter of 2021 saw consumer confidence in Dubai rising to its highest level since the second quarter of 2015.

The index recorded 145 points in Q1 2021, compared to 139 points during the same period of the previous year, and 142 points in Q4 2020.

The overall optimism in among the Dubai residents is driven by the improved outlook for the personal finance conditions during the next 12 months. The index showed that optimism on current personal finance conditions is particularly high among Emiratis at 89 per cent, followed by Arab expatriates at 87 per cent.

The rising optimism is also driven by the significant progress made in the vaccinations and the gradual opening of key sectors such as travel, tourism hospitality and retail contributing to improved hiring.

Demand multiplier

Consumer confidence is positively correlated to disposable income, level of accrued savings, ownership o of assets and their valuations, which effectively translates into wealth effect on the variable component of consumption.

Consumption is a key driver of aggregate demand that drives economic growth, job creation and ultimately the demand multiplier that results in sustained growth.

Dubai’s Purchasing Managers’ Index for February was 50.9, up from 50.6 in January. A PMI reading above 50 means economic activity is positive and the private sector business activity continued to extend gain in for a third straight month with positive job creation. Nearly 90 per cent of Dubai’s population expects improved chance of getting a job during the next 12 months.

While the overall economic activity in the UAE is on the recovery path, the GDP growth is forecast to pick up to 2.5 per cent and 3.5 per cent, respectively in 2021 and 2022, compared to an estimated 5.8 per cent contraction last year, according to the Central Bank of UAE (CBUAE).

Savings effect

In addition to the positive impact of new jobs on disposable incomes, the savings that made last year on lack of opportunities to spend on travel, dining or buying new cloths and consumer electronics will add to a strong pickup in demand.

The consumer index survey result shows people are waiting to spend their money in excess of basic needs, with 38 per cent wanting to spend on vacations and 37 per on outdoor entertainment. Clearly, the overall consumer sentiment is positive and point to jump in consumption demand and good times ahead.



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