Heavy rains disrupt business activities in UAE

Last Updated on May 5, 2024 3:41 am

The United Arab Emirates, an oil-rich country in the Middle East, is pursuing an economic diversification policy. This economy, one of the Gulf region, has also seen a lot of success. The country last saw steady production in the non-oil sector in April, but record rains led to a decline in business activity and product sales in the same month.

In a report, the media The National said, rains in mid-April left the UAE’s magnificent commercial and residential areas submerged in water. This rain was the heaviest since 1949 i.e. in 75 years.

Credit rating agency S&P Global’s Purchasing Managers’ Index (PMI) in April showed positive growth in the country’s non-oil sector, despite heavy rains continuing till the end of the month. But the index was the lowest in recent months.

The PMI was 55.3 in April, slightly down from 56.9 points in March. Earlier last February, the PMI index was 57.1, the highest in five years.

According to these, the United Arab Emirates saw the weakest PMI growth in April in nine months since last August. But the index remained above neutral 50 all the time.

In a report, the US credit rating agency said that heavy rains have disrupted business activities in the UAE and negatively affected sales. However, new purchase orders increased in April, albeit at a slower pace than in February.

The agency’s director of economics, Tim Moore, said, “April’s data shows strong growth across the UAE’s non-oil private sector.” However, recent surveys have indicated a sharp decline in new business activity due to heavy rains and floods.

Tim Moore also said that Dubai’s local companies have suffered severe losses in terms of sales.

Roads and buildings were flooded by a storm in the United Arab Emirates on April 16. Vendors were forced to close several businesses after the storm, along with transport services across the country. At that time the flight was also canceled due to floods.

Adverse weather conditions have contributed to the increase in the severity of the work backlog, the PMI report said. Survey respondents said average prices fell for the sixth straight month in April as competition for new jobs intensified. This is also reflected in the S&P Global Dubai PMI. The index was 55.1 in April, down from 58 in March and the lowest in eight months. According to the report, this has slowed the growth of new businesses.

Beyond the disruption of rains, respondents to the survey cited the impact of strong economic conditions and competitive pricing strategies as well as long-term business expansion plans.

Over the past few years, the UAE has created a variety of opportunities for foreigners to invest in the non-oil sector. Due to this, the cities of the country have become significant destinations for illegal money from different countries. Overall, the investment diversification plan and focus on non-oil sectors have reshaped the UAE economy. According to the country’s central bank forecast, the UAE economy will grow by 4.2 percent in 2024.

Employment in the non-oil private sector has been increasing for two years due to new projects and strong demand. But the rate of labor growth is at its lowest level since January. In addition, data for April indicated a sharp rise in both purchasing power and labor costs. The reason behind this is said to be the increase in the price of raw materials and the financial assistance given to the workers for the high cost of living.

Companies cut average product prices in April, the slowest pace so far in 2024. The price cut was due to competitive market conditions and efforts to increase sales.

Meanwhile, the authorities have taken several initiatives to help businesses and individuals affected by the rain. Among these are other measures including special benefits in bank loans.