(MENAFN- Khaleej Times) Robust economic fundamentals driven by the manufacturing, services and real estate sectors will continue to drive strong growth in Dubai despite weakening global conditions, a business confidence survey reveals.
The survey conducted by Dubai's Department of Economic Development, or DED, during the last quarter of 2014 reveals that most businessmen are upbeat about 2015 on the backdrop of a stable business environment and overall sales and revenues meeting expectations.
Dubai's Composite Business Confidence Index, or BCI, stands at 138.2 points in the fourth quarter of 2014, which is almost at level with the 140.6 points in the third quarter of the same year.
A recent survey on consumer optimism also underscores bullish sentiments. Dubai's overall consumer confidence index increased five points during the last quarter of 2014, compared to the same period of 2013. Improving job prospects and personal finances have driven positive sentiment revealed in the survey.
Dubai's economy is projected to grow 4.5 per cent in 2015, at a rate higher than the global growth forecast of 3.5 per cent, according to Shaikh Ahmed bin Saeed Al Maktoum, Chairman of the Economic Development Committee, President of the Dubai of Department of Civil Aviation, Chairman of Emirates airline and Chief Executive of the Emirates Group. He said the growth would be driven by both government and private sectors as Dubai's high-quality infrastructure would maintain the emirate's competitiveness.
The strong outlook projected by the latest DED survey is underpinned by a large number of new projects in the pipeline across all sectors. Survey respondents expect good business conditions over the near term, supported by the uptick in sales activity and client footfall during the winter season.
Commensurate with the BCI, the outlook for sales revenue for the first quarter of 2015 is at par with the previous year's forecast and stands at positive 61 per cent compared to 62 per cent for the fourth quarter 2014.
"Rising demand resulting from a strong economy coupled with buoyancy in tourist activity has bolstered the overall outlook. Expectations related to sales volumes have remained steady, both on a year-on-year basis and quarter-on-quarter basis. Those expecting a rise in their sales volumes during first quarter 2015 constitute 65 per cent in line with the corresponding period a year ago and similar to the outlook for fourth quarter 2014," said the DED survey based on feedbacks from 2,000 respondents.
The projected net balance for the sales volume for first quarter 2015 stands at 60 per cent vis-a-vis 62 per cent for the same year earlier quarter.
On price increases, 79 per cent of the surveyed firms indicated that they do not anticipate any change. Rise in the cost of inputs and general inflation has led to 17 per cent foreseeing an increase in prices while four per cent anticipate a drop mainly due to competition or low demand for their products.
Mirroring the pattern observed for sales volumes, the outlook towards net profits for the first quarter of 2015 is also in sync both on a quarter-on-quarter and year-on-year basis. "Higher profits are likely to be driven by stronger sales volumes, seasonal activity, acquisition of new customers and contracts as well as an overall robust business environment," the DED said.
Firms anticipating higher net profits during 2015 first quarter account for 63 per cent compared to 62 per cent during in the same 2014 period and 64 per cent for the last quarter 2014.
"This converts into a net balance of positive 57 per cent for outlook on net profits for 2015 first quarter compared to corresponding net balances of 54 per cent and 56 per cent for fourth and first quarters of 2014, respectively," the DED said in a statement. It noted that expectations with respect to the business environment are stable with 61 per cent participants forecasting an improvement in business conditions during first quarter this year versus 60 per cent for the last quarter 2014.
Investment plans for capacity expansion are steady on a quarter-on-quarter basis with 70 per cent saying they would invest in capacity expansion in fourth quarter 2014 compared with 69 per cent in third quarter 2014.
The DED said large companies have shown a stronger outlook compared to the small-and-medium-enterprise segment. The composite BCI for large firms is 144.6 points versus 128.5 points for SMEs.
Large firms are more confident than SMEs in relation to all the parameters constituting the index, such as sales volumes, selling prices, number of employees and net profits.
The manufacturing sector, according to the survey, is the most upbeat in relation to sales volumes, an indicator of real economic activity, while the services sector has the strongest outlook in terms of selling prices, boosted by seasonal demand. Further, the manufacturing and services sectors are more optimistic than trading, with respect to hiring and profitability.
The composite BCI for the export sector stands at 134.7 points compared to 138.2 points for the overall business community.
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